US automotive industry to warn about impact of tariffs

Washington – A broad spectrum of auto interests, armed with their latest impact studies, are preparing to testify today at a Commerce Department hearing that raising auto tariffs would harm the US industry and consumers severely.

The stakeholders are presenting a united front against the Trump administration's unprecedented investigation into whether imports of autos and auto parts pose a national security threat, saying a potential 25% tariff to limit foreign competition would undermine the manufacturing growth the president seeks.

"The National Automobile Dealers Association recognises the importance to the US of levelling the trade playing field, eliminating unfair trade practices and keeping America's automotive industry strong," NADA President Peter Welch said, according to an advance copy of his testimony.

"But a 25% tariff applied to all imports would hurt auto manufacturers, dealers, consumers and the economy as a whole. And the hardest hit would be our customers."

Among those scheduled to testify are the Auto Care Association, Motor & Equipment Manufacturers Association, and Richard Smallwood, CEO of Sumitomo Rubber North America.

The ACA and MEMA are part of a coalition of major auto industry groups representing nearly 10 million jobs in the US. The group is publicising its message about the tariffs' effect in full-page newspaper advertisements.

A study by the Center for Automotive Research (CAR), commissioned by NADA, forecasts that the price of a typical imported vehicle would rise $6,875, while the price of a US-assembled vehicle would jump $2,270.

CAR, a think tank supported by the auto industry, estimates that 2 million fewer vehicles would be sold and the industry would lose almost 750,000 jobs, including 117,500 at new-car dealerships. Consumers would also feel the pinch in higher used-car prices due to heightened demand and higher repair costs, CAR said.

In a soon-to-be published paper, excerpts of which were shared with reporters, the Peterson Institute for International Economics forecasts potential tariffs would raise vehicle prices between $1,400 and $7,000 for top-selling models, depending on a variety of factors including size. The research also predicts auto tariffs could cause 1 million to 1.2 million people to lose their jobs.

A more conservative Petersen Institute study several weeks ago, showing job losses of more than 600,000 if other countries retaliate, didn't account for the multiplier effect and the effect on demand caused by higher tariffs.

Auto interests are taking a much more aggressive approach to this trade disagreement with the White House because the stakes are so high for a global industry that sources components and exports vehicles around the world.

John Bozzella, president of the Association of Global Automakers, accused the Trump administration of pursuing an anti-trade ideology that is not grounded in facts.

"The Department of Commerce so far has been unable to outline any theory explaining how the commercial production of cars and trucks is connected to US national security," he said, according to a copy of his prepared remarks.

"Simply running a sectoral trade imbalance, which the secretary [Wilbur Ross] suggested as a rationale during a recent appearance before Congress, seems insufficient because it does not distinguish the US automobile industry from other industries where this is also the case."

Bozzella also criticised use of the 1950 Defense Production Act to demand proprietary business information from automakers as part of the investigation.

"To my mind, this highly intrusive, overbroad and burdensome tactic is simply the latest evidence that the Department possesses no evidence to support the idea that auto and auto parts imports harm the national security of the US. The exercise appears to be less an impartial effort to understand the facts than it is a policy hunting for a justification, and a solution in search of a problem," he said.

There appears to be little public support for the auto tariffs so far. Only a handful of some 2,300 comments received by the Commerce Department favor the idea, and half of consumers recently surveyed (773) by Cox Automotive said potential tariff increases will impact their next vehicle purchase decision.

Three in 10 shoppers said they would switch the type of vehicle they are considering, either from new to used, or certified pre-owned, or from imported models to domestically produced vehicles. And one in seven consumers would delay purchasing a vehicle until the tariffs are removed, with only 7% saying they would pay more an imported vehicle they liked.

Other scheduled speakers include the ambassadors of the EU, Canada and Mexico.