Trade Cases

Auto Hearing Showcases Opposition to Tariffs

Written by Sandy Williams

Section 232 auto tariffs were the subject of a Commerce Department public hearing on Thursday, July 19. The hearings were cut from two days to one after Commerce determined the 45 requests to testify could be accommodated in a single day. All but one of the 45 witnesses was expected to testify against the tariffs.

Participants included the Alliance of Automobile Manufacturers, the American Automotive Policy Council and the Motor and Equipment Manufacturers Association, foreign industry groups, and officials from the European Union, Mexico, Canada, Turkey, Japan, South Korea, Malaysia, South Africa and Taiwan.

Ahead of today’s meeting, Commerce was inundated with requests not to push forward with automotive tariffs. 

A letter from 149 members of the House was delivered to Commerce Secretary Wilbur Ross asking the administration to reconsider its course.

“We support the Department of Commerce as it seeks a level playing field for our manufacturers and workers in the global marketplace and penalizes bad actors,” the letter states. “We believe, however, that the taxpayer dollars being used by the Commerce Department for this investigation would be better spent on other endeavors. We do not believe that imports of automobiles and automotive parts pose a national security threat. Rather, we believe the imposition of trade restrictions on these products could undermine our economic security.”

In their letter, members of Congress asked Ross to consider when conducting the investigation the “vast and complex” network of suppliers required to build vehicles, dealers to sell them and the substantial after-market to repair them.

“The industry has rebounded from the depths of the Great Recession, and in some parts of the industry employment is actually higher than pre-recession levels,” wrote lawmakers in their letter. “However, imposing tariffs, quotas or other restrictions on automobiles and/or automotive parts threatens to undo that momentum.”

The White House also received a letter from seven associations in the automotive industry, warning that auto tariffs will jeopardize American jobs, the economy and U.S. technological leadership.

“Raising tariffs on autos and auto parts would be a massive tax on consumers who buy or service their vehicles — whether imported or domestically produced,” said the letter to President Trump. “These higher costs will inevitably lead to declining sales and the loss of American jobs, as well as increasing vehicle service and repair costs that may result in consumers delaying critical vehicle maintenance.

“Mr. President, we are engaged in a high-stakes global race to drive the next generation of cutting-edge vehicle technologies. Higher auto tariffs will leave less capital for investments in innovations and less competition to promote creative and beneficial technologies. At this pivotal and transformative moment for mobility, misguided U.S. policies affecting advanced vehicle technologies will be damaging to America’s auto sector.”

The letter was signed by the Auto Alliance, American Automotive Policy Council, AutoCare Association, American International Automotive Dealers Association, Global Automakers, the Motor and Equipment Manufacturing Association and the National Automobile Dealers Association.

“I’ve never seen the industry — broadly defined — as unified in its concern and in its opposition to high automotive tariffs as I see it today,” John Bozella, president and CEO of the Global Automakers told reporters on Tuesday. “Every aspect of the U.S. automotive value chain is united in its concern and opposition to this,” he said, adding “you cannot find a company that has asked for this protection.”

Ross: Too Early toTell if Tariffs Will be Imposed

Prior to the meeting, Ross said it was “too early” to say whether the tariffs would be imposed and that more analysis is necessary. “It’s obvious by the attendance here this morning how vital this industry is to the U.S. and global economy,” said Ross.

The United Autoworkers are one of the few organizations to support auto tariffs, but favor targeted measures over broad-based tariffs. When the investigation was first announced, UAW President Dennis Williams said, “I welcome the fact that they’re investigating this. The American workers have been handed a short stick for a long time.”

Jennifer Kelly, Director of Research at the UAW, said any measures should take into account the global nature of the industry. “Any rash actions could have unforeseen consequences, including mass layoffs of American workers, but that doesn’t mean we should do nothing,” she said in a comment to the Wall Street Journal

Adam Posen, President of the Peterson Institute for International Economics, said the probe hearing was a “sham” and the outcome was already decided. “This is something where they predetermined both the verdict and the schedule in which the verdict would be read and they were going backwards to fill it in,” he told Inside U.S. Trade on July 17. “They have to go through the show of allowing public comments, and the fact that they are cutting the hearing down to one day or less indicates the reality that no serious, responsible person can give them a public comment defending the absurdity of calling auto tariffs either a national security issue in general or specifically with respect to Canada and Mexico. This is the kind of thing that autocratic governments do with their economic policy — they don’t allow evidence-based processes and rules-based processes to work.”

Testimony Overwhelmingly Against Tariffs

Matt Blunt, head of the American Auto Policy Council, representing Ford, General Motors and FCA, said that the Detroit Three are “very concerned that the positive effects of the president’s policies could be undermined by tariffs.”

Blunt said that while trade barriers in other countries should be addressed, it should not be through tariffs. Tariffs would result in net loss of jobs “by increasing the costs of manufacturing cars…leading to lower demand, lower sales and production and ultimately fewer jobs in the American auto industry.”

During her testimony, UAW’s Jennifer Kelly spoke in favor of the investigation saying that trade has driven American jobs to low-wage countries like Mexico and China. “The remaining U.S. workers’ wages have been depressed by competing with low-wage countries. It’s our hope the Trump administration will take targeted measures to protect domestic manufacturing,” she said, adding that she understood broad tariffs or quotas “could cause harm.”

The National Automobile Dealers Association cited a new study by the Center for Automotive Research that indicated a 25 percent tariff on auto imports would raise vehicle prices by an average of $4,400 ($2,270 for U.S.-built cars and $6,875 for imported cars and trucks).

The CAR study also found that a 25 percent tariff on imported autos and parts would costs America 714,700 jobs and reduce auto sales by two million vehicles.

“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 NADA President Peter Welch. The average new car payment would rise from to $611 per month from $533 per month on a 69-month loan, he added.

John Hall, a maintenance worker at the Hyundai manufacturing plant in Montgomery, Ala., testified that auto imports do not threaten U.S. national security, noting that imported parts are used in the cars built in Alabama. “New tariffs on automotive imports would have a devastating effect,” he 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 percent tariff on parts would raise production costs at our Alabama factory by about 10 percent annually. This would force us to raise prices and cut production. A lot of Alabamians, my friends and neighbors, could lose their jobs.”

Representatives from Canada and the European Union said retaliatory measures will be taken if the U.S. decides to impose the auto tariffs.

“Should this investigation ultimately result in the application of tariffs on autos, Canada will once again be forced to respond in a proportional manner,” said Kirsten Hillman, Canada’s deputy ambassador to the U.S.

European Union Ambassador David O’Sullivan said the EU is preparing to respond to U.S. measures. “Import restrictions resulting from the present investigation could result in countermeasures on a significantly higher volume of U.S. exports, which we estimate at $294 billion, around a fifth of total U.S. exports in 2017,” said O’Sullivan. “For its part, the EU is proceeding with internal preparations in the event the U.S. were to adopt trade-restrictive measures.”

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