THE TARIFFS NOBODY WANTS
In almost every case, whenever a tariff or quota is imposed on imports that tax is strongly supported by the domestic industry getting the protective shield from lower-priced foreign competition. The sugar industry supports sugar tariffs; textile mills lobby for tariffs on foreign clothing. The steel industry and the aluminum makers are getting rich off of the high taxes on imported metals.
The trade barriers almost always benefit the protected industry by increasing its production, profits and domestic workforce. The problem with tariffs is they shift higher costs onto the backs of non-protected industries and consumers.
But what is peculiar about President Trump’s proposed 25 percent auto tariff is that even most of the domestic car industry producers don’t want it. They seem to be telling Mr. Trump: Thanks, but no thanks to the restrictions on foreign import competitors.
Last week, the Driving American Jobs coalition issued a statement opposing auto tariffs. This is a group representing the United States’ leading auto manufacturers, parts suppliers, auto dealers, parts distributors, retailers and vehicle service providers.
Get a load of the trade associations and companies signed on; the American Automotive Policy Council, the Auto Care Association, the American International Automobile Dealers Association, the Alliance of Automobile Manufacturers, the Association of Global Automakers, the Motor & Equipment Manufacturers Association, the National Automobile Dealers Association and the Specialty Equipment Market Association.
Even more remarkable is that the Auto Alliance, which represents 70 percent of all car and light trucks sold in the United States, also opposes the tariffs. This includes the big three: Fiat Chrysler Automobiles, Ford Motor Co., and General Motors. It also includes foreign car companies producing autos in the United States, including Mercedes-Benz USA, Volkswagen Group of America and Volvo Car USA.
Can someone please explain to me why the administration is rallying behind a tariff that the industry itself opposes?
So why wouldn’t domestic manufacturers love these added costs on their competition? Several reasons. First, the higher costs of producing autos means that roughly 1 million fewer new cars will be sold annually. This hurts not just consumers (who spend $340 billion on imported autos and auto parts each year, so a 25 percent threatened tariff would raise the price tag on vehicles by almost $75 billion a year), but the whole domestic and foreign auto industry, as shown in the chart below. Many cars would rise in price by $5,000.
Second, the reality of globalization and planetary supply chains means a car today is produced all over the world. The parts may come from Asia, the assembly from Mexico, the tires from Canada, the computer console system from Japan. Foreign cars — including Hondas, Toyota and BMWs — are often made in America. American cars are made with foreign parts. So everybody in the industry gets hit by the tariffs.
“There is no such thing anymore as a car only made in America,” says Mitch Bainwol of the American Automotive Alliance. “A car is now produced in many countries all at once.”
Finally, some 2 million cars made in America are sold abroad. The tariffs will make those Made in America cars more expensive for foreigners to buy. This would hurt auto workers — though the UAW union has been generally supportive of the tariff.
Mr. Trump’s heart is in the right place. He wants to save the U.S. auto industry and he wants to save American auto jobs. The biggest impact on the industry is not foreign competition, however. It is the radical change that is coming very soon with driverless cars, which will lower the demand for cars in the future as more people simply order rides on-demand and online through Uber-type applications rather than own cars.
Tariffs have almost never saved a domestic industry from decline and often times by sheltering domestic producers from competition only reward and prolong bad business practices. The Trump administration should stop trying to save an industry that doesn’t need or want saving.
Stephen Moore, a columnist for The Washington Times, is a senior fellow at The Heritage Foundation. He served as a senior economic adviser to Donald Trump during the presidential campaign.
Driving American Jobs represents the United States' leading auto manufacturers, parts suppliers, auto dealers, parts distributors, retailers, and vehicle service providers. We have been at the center of America’s economic recovery, creating hundreds of thousands of jobs, exporting millions of cars and trucks and proving, yet again, that American workers can compete and win in the global marketplace.
OPPOSING PROPOSED AUTO TARIFFS
In May, the Trump Administration announced the Department of Commerce would begin what’s called a Section 232 investigation on imported automobiles and motor vehicle parts, which under the Trade Expansion Act of 1962, gives the administration broad legal authority to impose tariffs on goods in the interest of national security.
While we understand the president’s focus on protecting manufacturing and other jobs and ensuring a level playing field with our international trading partners, we believe these tariffs will do the opposite. A twenty five percent tariff would have a devastating impact on the automotive and parts industry, because the industry is truly global. Many international nameplate vehicles are built in the U.S. while a number of U.S. nameplates are assembled outside our borders. And both assembly and repair parts for cars come from all over the world.
By the numbers: A 25% tariff on imported automobiles and auto parts would result in:
- The loss of more than 700,000 jobs
- A nearly $60 billion decline in U.S. gross domestic product
- A rise in the price of an average vehicle by nearly $7,000
- A decline in annual sales of as many as 2 million vehicles
- Up to 10% increase in the cost of repairs and replacement parts
The auto industry — suppliers, manufacturers, and dealers — supports millions of American jobs. Watch our latest video to learn more about the importance of the auto industry.
American Worker StoriesThe auto industry — suppliers, manufacturers, and dealers — supports millions of American jobs. Below are examples of the people and communities benefitting from an incredible manufacturing comeback.
ENGINE MACHINING, HYUNDAI
“Before joining Hyundai Motor Manufacturing Alabama in 2005, I was working as a waitress at a Waffle House in Montgomery, Alabama. Today, I oversee the machining processes for steel crankshafts in Hyundai engines. I take great pride in producing engine parts with no flaws because my parts are a critical component of our engines in Santa Fe Sport SUVs and Sonata and Elantra sedan.”
VICE PRESIDENT OF ONION CREEK VOLKSWAGEN, AUSTIN, TX
"My father started this business in 1989, at a time when he was one of very few African American new car dealers. Today, we employ 160 people in stable, well-paid careers. Once you’re working with us, we make sure you have opportunities to further your career. We are also blessed to give back to our community through a number of charitable groups, including the Boys and Girls clubs in all three cities where we operate. Family-owned dealerships like ours are a fundamental part of their communities and often one of the biggest employers in town. In Texas, where we’re located, our customers care deeply about buying products that are made in America. I’m proud to tell them the Passat or Atlas they’re eyeing is built in Chattanooga, Tennessee."
As a young boy, Matthew acted as an interpreter to his deaf parents. He and his father bonded over listening to music in the car, his father hearing the music in his chest with every beat of the kick drum. Now, Matthew works as an engineer at Mazda helping with the “visual noise” as well as actual noise. The boy who had to learn how to enjoy music on his own terms is teaching others how to rediscover sound quality in an era of streaming at 128 kbps. “My childhood hobbies turned into my career path and led me to where I am today at Mazda,” he said. “I couldn’t have planned it any better than that.”
RAYMOND CHEVROLET OF ANTIOCH, ILLINOIS
“As a dealer I have to meet payroll every month, and I cannot do that if sales fall dramatically. The last thing I want to do is layoff a valued employee. Many of my employees have been with our dealership for years. They are like family. But I might have to let some people go if a massive tariff hits my inventory of parts and new cars. If prices go up because of a tariff my customers will not buy as many cars. It’s that simple.”
TANIA PRATNICKI YOUNG
PLANT MANAGER, FCA
Tania knows a thing or two about world-class operations. As Plant Manager of the FCA US Dundee Engine Plant, she has led the plant to becoming the first U.S. facility, and only North American engine plant, to achieve silver status in World Class Manufacturing – an FCA methodology that focuses on eliminating waste, increasing productivity, and improving quality and safety. And she won’t stop until she gets the gold! “I love my plant. I love my job. I love my people. It’s a rewarding life. You’re making something. You see the results every day.”