Auto industry cries foul over looming car tariffs

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WASHINGTON — Having started a trade war with China and enraged U.S. allies with steel tariffs, President Donald Trump is primed for his next fight. He is targeting a product at the heart of the American experience: cars.

Trump’s latest plan is to consider slapping tariffs on imported autos and auto parts — a move he says would aid American workers but that could inflate car prices, make U.S. manufacturers less competitive and draw retaliation from other nations.

The action has also begun to provoke a backlash among member of Congress, who have so far been reluctant to challenge Trump policies that are upending decades of U.S. policies.

On Thursday, manufacturers, suppliers, car dealers and foreign diplomats will line up to testify at a Washington hearing to try to head off auto tariffs. After the hearing, the Commerce Department will decide whether to label imported vehicles and auto parts a threat to America’s national security and whether to recommend tariffs to the president.

In announcing the auto investigation in May, Commerce Secretary Wilbur Ross said, “There is evidence that, for decades, imports from abroad have eroded our domestic auto industry.”

Yet even General Motors, which ostensibly would benefit from a tax on its foreign competition, is opposed to Trump’s plan.

And even considering the administration’s trade war with China over Beijing’s predatory practices in high-tech industries and even after imposing tariffs on steel and aluminum imports from America’s closest allies, Trump’s auto tariffs raise the ante substantially: The U.S. last year imported $192 billion in vehicles and $143 billion in auto parts — figures that dwarf the $29 billion in steel and $23 billion in aluminum imports and the $34 billion in Chinese goods the administration has so far hit with tariffs.

“This is really taking it up one gigantic notch,” said Mary Lovely, a Syracuse University economist who studies trade. “I do think it may be a bridge too far.”

In the Senate, Democrat Doug Jones of Alabama and Republican Lamar Alexander of Tennessee have announced plans to introduce legislation opposing Trump’s proposed 25 percent auto tariffs. Both warned that the tariffs threaten tens of thousands of jobs in their states.

“Foreign automobiles and auto parts are not a threat to our national security,” Jones said. “But you know what is a threat? A 25 percent tax on the price of these imported goods.”

Despite Trump’s threat, the auto trade war might not happen anytime soon, if at all. The president might be angling to use the tariffs to pressure the European Union to lower its own auto tariffs or prod Mexico to agree to a rewrite of the North American Free Trade Agreement more favorable to the United States.

In targeting steel, aluminum and perhaps autos, the administration has weaponized an obscure provision of trade policy: The Trade Expansion Act of 1962 empowers a president to impose unlimited tariffs on particular imports if the Commerce Department finds that those imports threaten national security. The administration has defined national security broadly, suggesting that anything that hurts U.S. economic competitiveness damages national security.

Automakers, in the meantime, have warned that tariffs would raise their costs — and their customers’. In comments filed with the government, GM warned that that “increased import tariffs could lead to a smaller GM, a reduced presence at home and abroad for this iconic American company, and risk less —not more — U.S. jobs.”

Even companies that build cars in America rely on imported parts that would be subject to the tariffs, thereby raising automakers’ costs.

“There is no automaker that has 100 percent exclusively U.S.-sourced parts,” said Brian Krinock, Toyota’s senior vice president for North American factories. “It is a global business with global operations.”

Toyota manufactures nine models in the United States, all of which use some imported parts. About 30 percent of the Camry’s parts are imported, Krinock said, and a 25 percent tariff on those parts would raise the cost of a Camry by $1,800.

The Toyota Sienna, made in Princeton, Indiana, would be nearly $3,000 more expensive, he said, and the Tundra pickup truck, made in San Antonio, Texas, would cost $2,800 more.

Adam Posen, president of the Peterson Institute for International Economics, estimated that the tariffs would raise auto prices overall by 9 percent to as high as 21 percent for luxury models. They would cut the industry’s output 1.5 percent and cost 195,000 jobs, a Peterson analysis found.