Trump considers tariffs on imported cars, trucks

Departments - Regulations

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July 5, 2018

President Donald Trump is threatening to put large tariffs on cars imported into the United States.

“I met with Secretary of Commerce Wilbur Ross to discuss the current state of our automobile industry,” Trump said. “I instructed Secretary Ross to consider initiating a Section 232 investigation into imports of automobiles, including trucks, and automotive parts to determine their effects on America’s national security. Core industries such as automobiles and automotive parts are critical to our strength as a Nation.”

Section 232 process is legislation that allows the president to use tariffs to protect industries needed for national security such as munitions producers. Earlier this year, Trump used that process to place 25% tariffs on imported steel and aluminum. Such a review would have to find that the auto industry is critical to U.S. security and that it is in danger from foreign trade. While many lawmakers would argue that the industry is critical, the global nature of automotive production makes it harder to figure out the second criteria.

Even more difficult to parse is the talk of automotive parts. Virtually every car being produced today has global parts. Vehicles made in Japan have safety systems made in Europe and the U.S.; cars built in Mexico have engines from the U.S. made with engine blocks from Canada; cars built by South Korean-owned automakers in Georgia use steel from Asia and glass from Tennessee.

So, a large tariff on parts could drive up the cost of cars made in the U.S., and reciprocal tariffs from other countries could make U.S. built parts less competitive than European or South American components.

“Contrary to the assumption underlying the investigation on import vehicles, the U.S. auto industry is thriving,” said John Bozzella, president and CEO of the Global Automakers trade group, an organization that represents German, Japanese, and Korean automakers in the U.S. “To our knowledge no one is asking for this protection.”

Even pro-tariff groups that oppose free trade were wary of endorsing the potential for new duties on imports. During his last press conference with the media, outgoing United Auto Workers (UAW) President Dennis Williams acknowledged that Trump’s positions on trade are closer to the union’s views than other Republicans and most Democratic lawmakers. But, he stopped short of endorsing the action.

“We should have been looking at imports a long, long time ago,” Williams said. “I do support any time we look at these things.”

However, he declined to endorse the action without seeing details on what products would be hit with tariffs and how that would impact U.S. workers. Large tariffs on Canadian engine blocks, for example, could threaten U.S. jobs machining and finishing engines.

Trump has long made an issue of automotive imports, blaming production in Mexico and imports from overseas for declines in U.S. manufacturing numbers. During the past three years, he has criticized Ford for producing vehicles in Mexico, said Japan is taking advantage of the U.S. market by not buying more American-made cars, and that Germany unfairly benefits from open U.S. markets.

However, determining nationality is increasingly difficult in the automotive world. BMW exports more cars from the U.S. than it imports from Germany, Toyota and Honda get nearly all of their sales from vehicles produced in Ohio and Kentucky, and exports from Mexico have been dropping (mostly because Mexico is a base for car production, and U.S. buyers have instead been opting for SUVs and trucks).

Several news outlets called the action a maneuvering tactic, a ploy to get Mexico to offer more concessions during ongoing talks to renegotiate the North American Free Trade Agreement (NAFTA). The earlier steel and aluminum tariffs are another tool in that negotiating kit as the Commerce Department delayed enforcement of those duties on products from Canada and Mexico, but it could reimpose them during talks.

“If these tariffs are imposed, consumers are going to take a big hit because they will have fewer vehicle choices and higher car and truck prices,” Bozzella said. “This course of action will undermine the health and competitiveness of the U.S. auto industry and invite retaliation by our trading partners.”

During the 2016 presidential campaign, Trump often discussed the auto industry, promising to strengthen it and create more American jobs by making it harder to import vehicles here. www.commerce.gov; www.uaw.org; www.globalautomakers.org

Steel, aluminum tariffs move forward for US allies

After announcing 25% steel tariffs and 10% aluminum tariffs in February, the Trump Administration delayed enforcement of those on Canada, Mexico, and the European Union, presenting them as targeted measures meant to lessen the impact of Asian exports on U.S. metals production.

At the end of May, however, the U.S. Department of Commerce canceled those exemptions, enacting the tariffs on the nation’s largest trading partners and longest-standing allies.

“Current quantities and circumstances of steel and aluminum imports into the United States threaten to impair national security,” Trump Administration officials said. “These excessive imports are driven in large part by the worldwide glut from overproduction by other countries.”

The U.S. has reached bi-lateral trade deals with Australia, Argentina, and Brazil in steel exports, exempting them from the tariffs; and with Australia and Argentina on aluminum trade.

John Bozzella, president and CEO of the Global Automakers trade group that represents several Japanese, Korean, and European automakers and their suppliers, said, “The president’s decision to impose significant tariffs on steel and aluminum imports from the European Union and our NAFTA trading partners is disappointing and counterproductive. A tariff is a tax and this action will raise prices and hurt American auto producers and their customers. Any retaliation by our trading partners will multiply this harm and do nothing to encourage U.S. exports.”

In response to the metals tariffs, several U.S. trading partners have assigned counter-tariffs to products made here. Canada placed 25% tariffs on a wide range of American steel finished products (the two countries have a robust, two-way metals trade), including pipes and sheet used in automotive production. Canada will level 10% tariffs on a wide range of oddball consumer products ranging from strawberry jam to dishwasher detergent.

Mexico will impose reciprocal tariffs on flat steel (hot- and cold-rolled sheet, coated metal, and various tubes), lamps, pork legs and shoulders, sausages and food preparations, apples, grapes, blueberries, and various cheeses, up to an amount comparable to the level of impact from U.S. tariffs. www.commerce.gov; www.fin.gc.ca; www.globalautomakers.org; www.gob.mx

Highway Administration scraps emissions tracking rules

The Federal Highway Administration (FHA) is dropping Obama-era rules that required several municipalities to track vehicle CO2 emissions – further loosening rules that influence fuel economy performance for vehicles.

“This repeal will alleviate a burden on state departments of transportation (DOTs) and metropolitan planning organizations (MPOs) that imposed costs with no predictable level of benefits. This final rule does not prohibit State DOTs and MPOs from choosing voluntarily to measure and assess CO2 emissions,” FHA officials said in a regulatory filing.

The FHA rules don’t offer automakers direct relief from efficiency rules, such as the Trump administration’s April decision to revisit average fleet fuel economy standards, but they remove incentives that cities had to push for more fuel-efficient vehicles.

The Obama-era Moving Ahead for Progress in the 21st Century Act (MAP-21) rule required cities to track greenhouse gas emissions from transportation year-over-year to determine funding priorities for infrastructure spending. Tracking such emissions could have given cities incentives to create hybrid-only vehicle lanes, special priority status to fuel-efficient vehicles, or other rules that would have encouraged residents to opt for more fuel-efficient cars.

FHA officials said scrapping the rules will save municipalities about $11 million. They also said the rules weren’t necessary as other agencies track and regulate vehicle emissions. The FHA originally suspended the rules in 2017, but several environmental groups sued to block the action. In response, the FHA agreed to enforce reporting requirements until it crafted a new rule. That was the rule filed in late May, set to be effective July 2, 2018.

The U.S. Public Interest Research Group (PIRG), a pro-regulation advocacy group, was one of the organizations that sued the FHA in 2017. U.S. PIRG Transportation Advocate Matt Casale called the reporting rules “essential to minimize the impacts of climate change, which has been recognized by health experts worldwide as the greatest threat to global health in the 21st century. Saving this rule is a major step towards the goal of transitioning to a cleaner, healthier transportation system.” www.fha.gov; www.uspirg.org