Auto Industry 'Unites' Against U.S. Import Tariffs
Of all the things that automakers hate, losing money has to hold a permanent place at the top of the list. If you aren’t making money, you can’t keep building cars — and if you aren’t building cars then you’re not much of an automaker. Following that almost irresponsibly oversimplified logic, it’s no wonder the industry has been hesitant to endorse President Trump’s suggestion that the United States may need to enact new import tariffs.
While seemingly eager eager to provide manufacturers with the tools to get things done, the current administration clearly wants it done in America — and isn’t above punishing those who refuse to reciprocate. As a result, lobbyists have begun putting in some overtime.
“Nobody in the auto industry supports a 25 percent import tariff, unlike in the steel and aluminum tariff situation where you had the steel industry advocating for relief,” Jennifer Thomas, vice president of federal affairs at the Alliance of Automobile Manufacturers, said at a meeting with Bloomberg.
With car sales beginning to stagnate across the globe, another recession on the horizon, and manufacturers dumping vast sums of money into advanced technologies, nobody wants to get smacked with a 25-percent import duty simply because they weren’t fast enough in shifting production back to the U.S. But Trump remains concerned that imported light duty vehicles and auto parts may represent a severe economic threat — enough to place the country’s national security into question. The president is currently examining the Commerce Department’s probe into the matter under section 232 of the Trade Expansion Act.
A final decision on the issue should be reached by May 18th. However, White House economic adviser Larry Kudlow indicated, earlier this week, that it might take longer. Lobbyists and auto execs should be plenty busy either way.
Subaru, which is not represented by the Alliance of Automobile Manufacturers, sent America President Tom Doll to Washington earlier this week to announce that the company’s more than seven-year-long streak of monthly U.S. sales gains could end if new tariffs are imposed. “I came up here specifically to talk to our Congress people about these tariffs and the impact that they’re potentially having on our entire distribution chain and how that eventually is going to work itself through the distribution chain into our pricing,” Doll said on Tuesday. “This is something that we’re getting a lot of sympathy with from the Congress folks, so we’re hopeful that this resolves itself.”
While Subaru is more likely to be negatively impacted by import tariffs than other brands, its tune is a very familiar one. Over the last year, practically all automakers have said they’ll lose money and have to increase prices if new duties come to pass.
A 25 percent tariff on all autos and parts could boost new vehicle prices by an estimated $4,400 on average, according to a 2018 study by the Center for Automotive Research. Imported vehicles prices could rise by $6,875 per vehicle and U.S.-made autos may see a $2,270 bump, according to the report, which estimated more than 700,000 U.S. jobs could be lost as well.
Business conditions in the auto industry are beginning to deteriorate due to softening auto sales, rising interest rates, vehicle transaction prices at or near record highs in addition to rising costs from Trump’s steel and aluminum tariffs and new levies on certain auto parts from China, said John Bozzella, president of the Association of Global Automakers.
“We have a significant challenge ahead of us if these go into effect,” he said.
[Image: General Motors]
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