By on July 19, 2018

Image: 'master blaster'

As the United States considers imposing new tariffs of up to 25 percent on imported automobiles and parts, the industry has rallied together to stand against the proposal. Manufacturers already made individual cases for themselves and are now dropping very bleak-sounding industry projections on the U.S. Commerce Department in the hopes of changing the administration’s mind.

However, President Donald Trump continues to promote the imposition of tariffs to force a sort of economic justice. For years, China’s protectionist policies regarding automobiles forced American manufacturers to build inside its borders and partner with Chinese firms for years. That’s something Trump claims could be a national security risk. China also recently upped its tax on American-made autos to 40 percent, shortly after promising to lower them. Meanwhile, Europe still holds a consistently higher tariffs on imported cars than the U.S., except for light trucks.

Commerce Secretary Wilbur Ross seems aware that China may have gamed the system in its favor, but appears less convinced that it’s a matter of national security. On Thursday, during a hearing on the probe into the industry, he said it was “too early” to say what the United States would do. Meanwhile, auto groups continue to make their terrifying case. (There’s also quite a bit of rolling PR in downtown D.C. today, as you’ll see below.)

Image: 'master blaster'

After creating a major advantage for itself in terms of manufacturing, China wants to expand its automotive industry as quickly as possible. New import tariffs could help keep Chinese automakers out of North America and strongarm Europe into lowering its own taxes on U.S. vehicles if a deal can be negotiated. The taxes could also force outside manufacturers to set up shop within America’s borders, which is what happened in China — assuming the threat alone doesn’t bully other countries into playing ball.

“We said if we don’t negotiate something fair, then we have tremendous retribution, which we don’t want to use, but we have tremendous powers,” Trump said on Wednesday. “We have to — including cars. Cars is the big one. And you know what we’re talking about with respect to cars and tariffs on cars.”

However, auto groups tell the Commerce Department that the taxes would effectively cripple the industry. According to Reuters, a group representing major automakers told the department on Thursday that imposing tariffs of 25 percent on imported cars and parts would raise the price of U.S. vehicles by $83 billion annually and cost hundreds of thousands of jobs.

“Higher auto tariffs will harm American families and workers, along with the economy” and “would raise the price of an imported car nearly $6,000 and the price of a U.S.-built car $2,000,” said Jennifer Thomas, vice president for the Alliance of Automobile Manufacturers.

She also mentioned that the United States exports more than $100 billion worth of vehicles and auto parts to other countries every year. Retaliatory fees from other nations could put a serious dent in that number, if they haven’t already.

Another study, released by an dealer group, stated that the tariffs could reduce domestic auto sales by 2 million vehicles annually and cost more than 117,000 auto dealer jobs, or about 10 percent of the total workforce.

Jennifer Kelly, research director for the United Auto Workers union, told the Commerce Department that U.S. auto production has fallen from 12.8 million vehicles in 2000 to 11.2 million in 2017. The industry scaled back roughly 400,000 jobs during that time. “We caution that any rash actions could have unforeseen consequences, including mass layoffs for American workers, but that does not mean we should do nothing,” she said. The UAW seeks a “targeted approach” to the problem.

It’s worth mentioning that these estimates come from an industry that’s very fearful of change and wants to protect its bottom line. Make no mistake, the risks of this are very real. However, similar protectionist tactics in China have worked in its favor.

Would they work in the United States and function to solidify investments and jobs? Nobody really knows. The industry’s projections are incredibly negative, but they’re just projections that examine a worst-case scenario — nobody has a crystal ball. That doesn’t make the tariff threat anything more than a big gamble, though. Everyone was hungry to get into the Chinese market to sell vehicles a few years ago but, for the most part, America has been settled.

Instead of forcing new investments and securing jobs, these tariffs could seriously upset the balance. The United States isn’t a new market and, at this point, neither is China. Whatever national security risks the current administration sees in terms of automobiles, may be too far gone to be relevant.

While the Commerce Department’s public hearing continues until the end of the day, the investigation has been ongoing since May. Ross said it will continue trying to determine “whether government action is required to assure the viability of U.S. domestic production.” A final decision should be made within a couple of months.

[Images: ‘master blaster’]

Get the latest TTAC e-Newsletter!

45 Comments on “Trade War Watch: As Commerce Secretary Ponders Auto Tariffs During D.C. Hearing, Automakers Call Out the Troops...”

  • avatar

    So even Wilbur Ross isn’t sure about the questionable “national security” claim.

    • 0 avatar

      This is a national security issue. It’s not debatable. Ross, like many others, is worried about the implications of federally classifying these issues as related to national security because it could transfer too much power to the executive branch.

      The arguments about the nuances of American civics have little or nothing to do with the manufacturing base, and the artificially-induced sellout of American workers by foreign central banks and US corporations, who are working in tandem to redistribute US wealth abroad.

  • avatar

    Ah well, I wish those pictures had come out better. I think it might be a compression issue. That’s Pennsylvania Avenue those Toyotas are rolling down, circling the Commerce Department where the hearings are being held today. I pulled out my phone and snapped about a dozen pictures. Also included were the Corolla (Mississippi), Avalon (KY), Lexus ES (KY), Highlander (IN), Sienna (IN), Tacoma (TX), Sequoia (IN), and another Tundra (TX). There was another Tundra in the lead noting 23.4 billion in investments. The whole convoy was of course followed by a blacked-out Tahoe.

    And yes, I’m obviously a Road Warrior fan.

    • 0 avatar

      The whole convoy was of course followed by a blacked-out Tahoe…

      That’s a little bit of irony…

      As many of the B&B have brought up it would be interesting to see % American (or NAFTA anyway) parts content posted on each of those vehicles including the Tahoe.

      I was watching a YouTube review of the F150 5.0 and the reviewer was talking to a local mechanic friend who tags along on some of his rides and shop inspections of vehicles. He asked the mechanic point blank: “If you had to buy a full size truck which one would you buy?”

      The Mechanics reply: “Toyota. I was raised on Chevy but Chevy’s a pile now.”

  • avatar

    My heart is pumping canal water for the UAW and the automakers. Gotta love the scare tactics though. Two spokespersons named Jennifer, neither of whom will be spotted leaving a Mensa meeting.

  • avatar

    TTAC the CNN, MSNBC, of the auto news

  • avatar

    I agree that we’ve been taken advantage by some countries, mainly China, but I’d like to see a more surgical approach, rather a sledgehammer.

    And yes, there are national security implications from “partnerships” with Chinese firms, especially when technologies are dual-use, or can be diverted into military use. Most of these “partnerships” are meant mainly to help Chinese manufacturers get up to speed – then, when the partnerships end, they can replace US products with their own.

    • 0 avatar

      We have been taken advantage of by our elected representatives who’s campaigns are funded by K Street types. Congress sold us down the road and overseas corporations were happy to seize the opportunity to profit at our demise. US corporations and Wall Street love cheap labor and the associated cheap imported goods. The marketing scheme by big media funded by ads from big corporations is a giant swindle for middle America. Sorry, it’s the truth. MAGA.!

  • avatar

    At one time, Toyota considered moving their corporate headquarters to the US, and becoming a US corporation.

  • avatar

    Automakers owe reparations to the automotive public for the past 54 years of Chicken Tax 25% tariff on light trucks. You have been silent as U.S.A. imposed this tax on imports, artificially raised prices and stifled innovation of light trucks in North America.

    Now you call out the troops……

    End the Chicken Tax

    Harmonize emissions and safety with global market

    Allow individuals to import one vehicle per year without EPA and NHTSA overcomplicated regulations

    • 0 avatar

      How are automakers guilty of Chicken taxing? What do you feel you’re owed? And by whom? It’s clear Toyota, Honda and Nissan benefit the most (if any) from their Chicken taxing.

      But how has the Chicken tax “stifled innovation”? Do you mean the Space Age Mahindra and Rocket Science Great Wall?

      Pickup trucks are one of the best values around, even before massive rebates. If you want a pimp’d out, luxo truck at 2X the price of “base”, that’s entirely on you.

      Clearly you’ve never heard of European Chicken Tax, since I guess it’s Taboo to talk about here.

      Exceptions/exemptions could be made for very limited quantities, but what would be the upside for foreign automakers? Or for you and I?

      US regulations aren’t “overcomplicated” unless you’re talking about unsafe/dangerous and gross polluting trucks. Otherwise, regulations are basically harmonized now. What’s the major difference between a US market Fiat 500 and the Euro version? Blinkers?

      • 0 avatar

        “What do you feel you’re owed?”
        — At least three compact pickup trucks between 1984 and today.

        “And by whom?”
        — The protectionist government that emplaced that Chicken Tax in the first place.

        “It’s clear Toyota, Honda and Nissan benefit the most (if any) from their Chicken taxing.”
        — They, and we, would have benefited more by having truly AFFORDABLE pickup trucks on the market.

        “But how has the Chicken tax “stifled innovation”?”
        — Pickup trucks are 10% larger than they were in 1984; “small” pickups are 15% larger than they were in 1984.

        “Pickup trucks are one of the best values around, even before massive rebates.”
        — At a 50% profit margin BEFORE rebates, they are NOT a good value.

        “If you want a pimp’d out, luxo truck at 2X the price of “base”, that’s entirely on you.”
        — Don’t you mean 3x the price?

        “Exceptions/exemptions could be made for very limited quantities, but what would be the upside for foreign automakers?”
        — A fresh market for relatively rare vehicles.

        “Or for you and I?”
        — Vehicles we really want, rather than what the American OEMs say we want.

        “What’s the major difference between a US market Fiat 500 and the Euro version?”
        — A Fiat 500 isn’t a pickup truck. And I’ll tell you now that the 500 is a great little car; a real blast to drive as well as economical. Personally, I’d love to see the little Strada truck come to the US. Or the Chevy Tornado… or the GMC Montana…

        • 0 avatar

          You failed to answer the question so I’ll restate it for you.

          US Fiat 500, Euro Fiat 500. What’s the technical/regulatory differences?

          American OEMs (including Toyota/Honda/etc) don’t get to decide what’s for sale. The buying public does. Let me emphasize “BUYING”.

          What do you mean by “Fresh” and “Rare”? Would you still be able to buy what’s fresh but extremely rare. How many of these untested, unapproved trucks from China and India should be allowed in?

          Price (transaction) has little to do with “profits”. The market sets the actual price, regardless if sold at a loss. In fact the higher volume trucks are the most profitable, also by a landslide (and most likely to sell well below MSRP), and you think that’s a coincidence?

          So you think “lack of innovation” means lack of “smaller” pickups”? Go ahead and speak freely as a “buyer” that didn’t buy one those true-compact before they were taken off the market. OEMs aren’t stupid. When you buy they build. You don’t buy, they stop building. Why is this so complicated for you.

          Pickups don’t really range up to 3X the price of “base”, when comparing base crew cab 4wds, to loaded, luxo trucks.

          Sorry, US buyers don’t want what’s “truly affordable”. Why didn’t the Toyota Echo make a dent in Camry sales at 2 or 3X the price? Same basic cars, 4-doors, a steering wheel, etc.

    • 0 avatar

      I am one of those opposed to the Chicken Tax. As a result, we no longer have compact pickup trucks that I’m betting nearly 16% of the buying public wants.

      • 0 avatar

        I don’t know of anyone that’s Pro-Chicken tax, except BAFO, but everything has gone upsize since the true-compact trucklet pickups, based on compact fwds of their day, and lacked any kind of marketable share of the pickup segment towards their demise, Chicken taxed the whole time.

        They circled the drain as long as they could. Where were you?

      • 0 avatar
        Big Al from Oz

        Give up on him. He has Fragile X syndrome. They tend to exhibit a very narrow and limited interest in something, ie band, sport (team) or vehicle etc.

        DiM’s limited interest is in full size American pickups. If you challenge him or present anything he considers negative towards his interest he reverts into a fantasy. This is evident by his fanciful and creative responses.

        He actually building barriers to protect himself emotionally. As you have witnessed he’s never delivered, ie links to support his “fantasy”. His comments are subjective as he’s incapable of objectivity due to his infatuation.

        • 0 avatar

          @Big Al: “Give up on him. He has Fragile X syndrome.”

          No, it’s not a matter of giving up; that’s what he wants us to do. We give up and he gets away with whatever he wants. Hell, that’s how he got the office in the first place! Americans gave up and chose him simply because they liked Hillary less. We’re paying for it now.

          No. Now we need to get rid of him. We need to find a LEGAL way to kick him out of office and I think Mueller is close to having everything he needs to do it. The problem is, that doesn’t eliminate any of those in lower offices and Congress who have supported his stupidity and the people who voted THEM in are unwilling to understand that. We have gone farther back in the last two years than any two previous Presidential terms of office–worse even than “W”, who effectively bankrupted us after we had finally–after 6 decades of work–managed to balance the budget for the first time this century, if not in the history of this country. That didn’t mean we were out of debt; only that we could effectively pay our bills. Now look where we are!

          I don’t know what to say. Sometimes I think we need to completely wipe out our government and build it anew–with a constitution that prevents a two-party political system. I’ve been watching this for almost 50 years–since I was old enough to understand what was happening–and what I’ve seen is a pendulum that swings so rapidly back and forth that it’s tearing this country apart. I love this land and I love this country–but something’s going to blow and I have no idea what the result will be.

    • 0 avatar
      Big Al from Oz

      You make lots of sense.

      But unfortunately the US president is soft up top…..and Putin owns him.

  • avatar
    schmitt trigger

    The Trump administration won’t allow its decision to be swayed by facts.

    • 0 avatar

      Such as? The trade deficit is sustainable? or China, Japan, and the EU aren’t really holding over $3T in US treasuries to manipulate spot exchange rates? There isn’t an imbalance in global tariffs and trade barriers?

    • 0 avatar
      Big Al from Oz

      OMG Trump using facts? He might be successful if he adopted your idea.

  • avatar
    Gardiner Westbound

    Even if European and U.S. import taxes were equalized there is little evidence the former would buy American vehicles in quantity.

    • 0 avatar

      That’s not really the point. But at least there would be the possibility, or baby steps towards “selling in quantity”.

      Next on the agenda would be EU non-tariff barriers, arguably the tougher of their protectionist’s measures.

      And it should’ve just been a small step. So ask yourself (if you believe what you’re saying) why the EU prefers to go to war.

    • 0 avatar

      This has little or nothing to do with selling American brands to foreign countries, though that is of some importance with muscle cars, Jeeps, etc.

      This is about the situs of manufacture for all car brands. Currently, auto manufacturers, including US manufacturers, are assembling and producing components outside of the NAFTA zone, and then bringing them into the NAFTA zone with virtually no penalty. This is only possible for two reasons 1) US tariffs are virtually non-existant 2) foreign central banks and governments are indemnifying them against movements in currency exchange rate caused by the US trade deficit by purchasing US treasuries and pumping capital into the US.

      In other words, American manufactured vehicles, whether American brands or foreign brands, are far more efficient that people realize, and the auto manufacturers are revolting because they don’t want to lose the massive multi-billion dollar subsidies they are enjoying when they produce abroad.

      At this point, I couldn’t care less if Detroit goes bankrupt. They are even more insidious, in some ways than foreign brands. However, I do care about the amount of NAFTA content in vehicles that are dependent upon NAFTA customers. The 4Runner, for instance.

    • 0 avatar

      @Gardiner: Might I interest you in a 1963 French movie entitled, “Mon Oncle”? I contend you would be surprised at just how many AMERICAN cars are in that movie. Sure, it’s more than 50 years later but that’s at least part of what the Chicken Tax has done to automotive trade around the world.

      • 0 avatar

        Now the poor, abused Chicken tax is responsible for the elimination of US cars from Europe? Explain please…

        You forget this all started with innocent (US export) chickens, then out of nowhere, a damning tariff against them, a retaliatory tax against VW Type II Transporters, then a prohibiting tax placed on all USA autos, vans and pickups, which is what we still have today, including the Euro Chicken tax you’re apparently unaware of.

        But somehow, ’cause of chickens, you think it’s one sided???

    • 0 avatar
      Big Al from Oz

      I agree, the EU would increase sales in the US.

      There is very little need for fullsize pickups and their station wagons in the EU.

      Most any large engine vehicle in the EU must be of quality. Just compare BMW and Mercedes Benz US made large vehicles, on average far better quality than $26k based pickups and pickup station wagons.

      • 0 avatar

        If everyone thought like BAFOES, yeah.

        But no, the US SUV and pickup “grey market” would tell you otherwise. Even in a niche capacity, damn right there’s a need, starting with the commercial side.

        US fullsize van ambulances are found everywhere in the world. Perhaps it’s not good for global rescues vehicles (Mercedes, Fiat, Peugeot, etc) to breakdown?

        Behind and under exemplary panel gaps and exquisite soft touch interiors, the finest woods, lays a mechanical and electrical disaster.

        Smaller engines for big vehicles aren’t hard to do. 2.7 F-150s? 4-cylinder Silverados?

        The EU knows exactly what they’re dealing with, and consequently go to war over it.

      • 0 avatar

        @Big Al: “There is very little need for fullsize pickups and their station wagons in the EU.”

        — Oh, I’m quite sure we could do well with pickup and SUV sales in Europe; FCA is proving that quite handily. The problem is, any engine we Americans would put into them is considered over-sized–garnering a Luxury tax and others related to economy while any engine THEY use is considered under-sized in the US. Worse, because of the propensity of American vehicles to gain weight over the last 20 years, those sub-2.0L engines are having to haul around almost twice the weight of their European equivalents (which are also smaller than the American models when it comes to those same trucks and SUVs)

        The real problem is the American perception of “bigger is better.” It’s a perception I disagree with.

  • avatar

    The industry has been warned that the administration feels this is a national security issue (it is), and yet they splash PR cash on “public awareness” psyops, while clearly paying the UAW to concern troll, despite losing 400,000 auto manufacturing jobs in the last 2 decades.

    The US is jumping the shark. Every single industry operates like a counterintelligence agency. Flagrant and continuous violation of the Logan Act, while also fomenting social unrest until someone agrees to give them what they want or pay tribute. This is their response to losing control of American trade policy. Did they do this when Obama was in office, and busy passing the worst fuel economy regs in the history? No, they were begging for public money, and arguing over who best kissed the federal ring.

    We are fast approaching a space-time when these corporate executives and PR operatives will have to be jailed. We are living in a dystopian day dream. Their methods are exactly how American intelligence agencies collapse foreign countries. This is an attack on the United States for the benefit of foreign nations, not a PR campaign.

  • avatar

    Reciprocal trade, there problem solved, next.

  • avatar
    Carroll Prescott

    There was precious little to like about Toyoduh before this – now every vehicle should be scrapped, crushed, and torn to bits (with their owners inside).

  • avatar

    “For years, China’s protectionist policies regarding automobiles forced American manufacturers to build inside its borders and partner with Chinese firms for years.”
    I’m not sure that anyone was “forced” to build cars in China. They were economic decisions by the carmakers. They agreed to China’s egregious terms.

  • avatar

    These protectionist measures should have been done a quarter century ago. It is now probably too late to do anything about it. Detroit has hallowed out a significant portion of their design and engineering long ago. What Trump can do is save industries that are in trouble now. Right now because of NAFTA Canada has basically taken over the animation and special effects industry. A lot of those mindless superhero films that seem to fill Cineplex’s are made in Toronto, Montreal, and London. The last time a US based special company won an Oscar was in 2013 for Life of PI. After winning the Oscar for Life of PI the entire special effects staff of Rhythm and Hues jobs were outsourced to a foreign studio. This ordeal is covered in a documentary entitled Life or PI. The sad fact is the US is losing its ability to entertain the world, and if things don’t change Hollywood will become an industrial ghost town like Flint Michigan. Hollywood has pretty much become just a business center were deals are made, while the actual film production takes place else were.

    Other industries currently in trouble in the US are robotic and machine tool producers. These two industries are vital to any industrial economy. Even though the US continues to have a leadership role in robot research just about every robot in an US assembly line is produced in either Asia or Europe. Even Tesla has pretty much become reliant on a German robotics company for its manufacturing.

    Maybe the reason Trump is harping on the auto industry is because he knows it is easy for the public to grasp. Let’s be honest most America have little knowledge or interest in the robotics industry. The truth is since NAFTA was initiated the US auto industry has just lost too much auto parts production for it to be completely self-sufficient.

    • 0 avatar

      @akear: You could have used better words in that first paragraph of yours (hallowed?) but in essence, I agree with what you’re saying; almost all of America’s car building (not including trucks) has been shopped overseas, which has resulted in undesirable products and ridiculous inflationary prices on the trucks themselves. (50% of the MSRP is profit, which is how they can afford 10% rebates and more while still posting near-record profits.)

      What Trump is doing now makes matters worse, not better. The American brands need real competition in order to make their products better and more affordable.

      • 0 avatar

        “…has resulted in undesirable products and ridiculous inflationary prices on the trucks…”

        Downsizing engines (gaming EU trade barriers) is a cinch. It’s a means of chasing one’s tail, since it saves very little (fuel), but not quite Rocket Science. Turbos. wow.

        Pickup prices have nothing to do with “profits”. The Tundra is priced higher than the F-150, trim for trim, before rebates, yet Tundra profits are thin, if at all. Anything beyond power windows (pwr grp), cruise, leather, sunroof and a couple others, is totally unnecessary.

        But if you do want mad (stupid) luxury, they’ll supply it. Guilty as charged. Otherwise they’re one of the best values around, never minds unmatched “resale”.

        American brands (especially “Big 3”) have been flooded with competition, starting 50 years ago, so much that it basically put them out of business. I don’t know what more you could ask for. Tatas?

        Figure just Ford Trucks alone, CUVs to HD pickups, their Euro demand and sales would “outsell” Volvos in the US (regardless of where they’re made), and probably Mitsubishi too, combined.

        Volvo and Mitsu have nothing to do with Ford trucks, but as an example, if Volvo/Mitsu weren’t for sale in the US, would anybody miss them? How much?

        Ford trucks are found in every corner of the world, regardless of official import, mostly commercially and rescue, some would call it cult-like (personal use). As far as legit EU imports, they’d just be another “choice” or niche.

        Nothing to go to war over. Or is it?

Read all comments

Recent Comments

  • sgeffe: Especially the one where the poor father-to-be injures himself “south of the border” while attempting the...
  • Art Vandelay: Pile of S H I T
  • eng_alvarado90: I stand corrected on that one.
  • Lou_BC: I wanted a smaller truck so I can go more places in the backcountry. In town I get around just fine in my 20...
  • Dave M.: Congrats on the ‘vert, Mikey. Once the sun goes down here in TX a convertible is hella fun.

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Jo Borras
  • Mark Baruth
  • Ronnie Schreiber