Tue | Nov 20, 2018

Auto industry urges US to hit brakes on proposed car tariffs

Published:Sunday | July 22, 2018 | 12:00 AM
Critics lined up to urge the Trump administration to reject auto tariffs on Thursday, July 19, 2018. (AP)

The US Commerce Department sought feedback on President Donald Trump's plans to consider taxing auto imports. It got an earful at an all-day hearing Thursday.

Critics lined up to urge the administration to reject auto tariffs. They argued that the taxes would raise car prices, squeeze automakers by increasing the cost of imported components and invite retaliation from the United States' trading partners - and allies - like the European Union and Canada.

Jennifer Thomas of the Alliance of Auto Manufacturers registered her organisation's opposition to levies on car, truck and auto parts imports. She noted that "our view is shared by over 2,200 comments that were filed before this hearing. In fact, we were only able to find three organisations" in favour of pursuing the tariffs.

Trump has ordered Commerce to investigate whether auto imports pose a threat to US national security that would justify tariffs or other trade restrictions. Earlier this year, he used national security as a justification for taxing imported steel and aluminium.

Auto tariffs would escalate global trade tension dramatically: The US last year imported US$192 billion in vehicles and US$143 billion in auto parts figures that dwarf last year's US$29 billion in steel and US$23 billion in aluminium imports. Not to mention the US$34 billion in Chinese goods the administration has so far hit with tariffs in yet another dispute over the predatory practices China deploys in a push to challenge US high-tech dominance.

Nearly 98 per cent of the cars and trucks that would be hit by the tariffs are imported from US allies: the EU, Canada, Japan, Mexico and South Korea, according to the Peterson Institute for International Economics. David O'Sullivan, the EU's ambassador to Washington, said it was "absurd" to think that imports from staunch allies undermine America's national defence.

In a study out Thursday, the Center for Automotive Research found that a 25 per cent tariff on autos and parts would cut US auto sales by 2 million and wipe out 714,700 jobs. It would also raise the price of the typical new car sold in the United States (now about US$35,000) by US$4,400 - US$2,270 for US-built cars and US$6,875 for imported cars and trucks.

"New tariffs or quotas would also reduce competition and consumer choice; increase the cost of used vehicles; and raise the cost of getting vehicles serviced and repaired," said Peter Welch, president of the National Automobile Dealers Association, which commissioned the study.

Welch said the tariffs would push the average new-car payment to US$611 a month from US$533 a month (over 69 months on average).

John Hall, a maintenance worker at the Hyundai Motor Manufacturing plant in Montgomery, Alabama, testified that auto imports pose no threat to US national security. "In fact, it's just the opposite," he said. Hyundai imports parts that go into its Alabama-built cars.

"New tariffs on automotive imports would have a devastating effect," Hall said. "I am one of thousands of American workers whose livelihoods would be put at risk by a substantial tariff on automotive goods. It would not be possible to change our supply chain overnight, and a 25 per cent tariff on parts would raise production costs at our Alabama factory by about 10 per cent annually."

- AP