GM says car tariffs would lead to US job cuts, asks for targeted trade approach

GM says car tariffs would lead to US job cuts, asks for targeted trade approach

Country's largest automaker says tariffs would hurt, not help industry growth.

July 2, 2018
By Robert Schoenberger
Cars/Light trucks Design Manufacturing Regulations

Cleveland, Ohio – One of the chief arguments that foreign governments and automakers from Europe and Asia have used to oppose President Donald Trump’s call for steep tariffs on imported vehicles is that no one is asking for protectionist policies. If car companies were suffering from the burdens of international trade, they would be begging for such policies.

On Friday, the largest automaker in the United States agreed. In regulatory filings, General Motors Vice President of Public Policy North America Dan Turton says the proposed tariffs would shrink the company and lead to job losses in the U.S.

“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,” Turton argues in the filing. “The threat of steep tariffs on vehicle and auto component imports risks undermining GM’s competitiveness against foreign auto producers by erecting broad brush trade barriers that increase our global costs, remove a key means of competing with manufacturers in lower-wage countries, and promote a trade environment in which we could be retaliated against in other markets.”

Throughout its filing, the automaker argues that global automakers benefit from producing different products in different regions – balancing production costs with vehicle prices. And, that global structure supports a strong U.S. headquarters presence in Detroit, where it does the bulk of its engineering, sales support, design, product development, and testing.

Further, because the company imports many of its least expensive vehicles, “Some of the vehicles that will be hardest hit by tariff-driven price increases – in the thousands of dollars – are often purchased by customers who can least afford to absorb a higher vehicle price point.”

So, the company argues, tariffs could lead to higher vehicle prices industry wide, because many vehicles are imported, and because vehicles made in the U.S. rely on parts made abroad. Higher prices would depress demand, lowering sales and leading to job losses.

“If prices are not increased and we opt to bear the burden of tariffs or plant moves, this could still lead to less investment, fewer jobs, and lower wages for our employees,” Turton says. “The carry-on effect of less investment and a smaller workforce could delay breakthrough technologies and threaten U.S. leadership in the next generation of automotive technology.”

In addition, tariffs imposed by Washington on aluminum and steel are already drawing reciprocal tariffs from foreign governments, lowering GM’s competitiveness in China and other countries. And, the company argues, GM’s success in Asia is good for America.

“The United States directly benefits from GM’s ability to maintain a competitive edge and maximize the effectiveness of our operations on a global scale,” Turton explains. “The majority of the profits we earn from our global production and sales come back to the United States to support jobs, investments in our plants, and advanced R&D.”

In his conclusion, Turton speaks for the entire U.S.-based auto industry, calling global free trade agreements a source of strength for automakers, not a bad deal hurting the industry.

“U.S. auto companies need U.S. trade deals that recognize the strength that comes from global operations and a global supply chain,” Turton says. “GM suggests prioritizing work with our adjacent trading partners to strengthen U.S. manufacturing and advance implementation of modernized NAFTA (the North American Free Trade Agreement) and KORUS (U.S. Korea Free Trade Agreement) agreements. The overbroad and steep application of import tariffs on our trading partners risks isolating U.S. businesses like GM from the global market that helps to preserve and grow our strength here at home.”

About the author: Robert Schoenberger is the editor of Today's Motor Vehicles and a contributor to Today's Medical Developments and Aerospace Manufacturing and Design. He has written about the automotive industry for more than 18 years at The Plain Dealer in Cleveland, Ohio; The Courier-Journal in Louisville, Kentucky; and The Clarion-Ledger in Jackson, Mississippi.