Trump meets with his trade team today to discuss a Draft of Car Import Tariffs.
Trump claims that auto imports are a threat to US national security under section 232 of the 1962 Trade Expansion Act.
It’s the same provision Trump used to justify steel and aluminum tariffs earlier this year.
Yes, it’s totally stupid.
Truce Won’t Last Much Longer
European Commission President Jean-Claude Juncker says U.S. Car-Tariffs Truce May Not Last Long.
“We had achieved that there will not be a new trade conflict over the summer months until the end of the year, particularly with regard to car tariffs,” Juncker said in a speech in Berlin on Monday.
Auto tariffs at that level would add about 10,000 euros ($11,300) to the sticker price of the average European-built car sold in the U.S., according a European Commission assessment obtained by Bloomberg last summer. That would cut U.S. imports of European cars and car parts in half, the commission forecast.
Auto Companies Blast Tariffs
Please consider How Car Companies Are Blasting Trump’s Import Investigation.
- GM: Says tariffs “could lead to a smaller GM” and risks resulting in “less — not more — U.S. jobs” by increasing costs and spurring retaliation by countries that could hurt the company in other markets
- Ford, Fiat Chrysler: On behalf of members GM, Ford and Fiat Chrysler, the American Automotive Policy Council estimates a 25 percent levy would be an $83 billion tax burden for the U.S. auto industry and consumers.
- Toyota: The company has 10 manufacturing plants and an eleventh being constructed soon with Mazda Motor Corp. that directly or indirectly employs 137,000 people. It’s invested almost $25 billion in the U.S. to design, engineering, manufacture and sell Toyota and Mazda vehicles. A 25 percent tariff on imported vehicles and parts would raise the price even of the Kentucky-built Camry sedan — the top-selling car in America — by about $1,800
- Nissan: Has invested $11.8 billion in U.S. manufacturing, employs 22,000 directly and boasts the country’s biggest vehicle production facility, in Tennessee.
- BMW: Has invested almost $9 billion in its South Carolina plant and is also the only manufacturer that produces more cars than it sells in the U.S.
- Volkswagen: Employs about 3,500 at plant in Tennessee and directly supports almost 50,000 U.S. jobs.
- Mazda: If a 25 percent tariff is imposed on imported vehicles, the company may change plans to invest in its dealer network and in a new plant it’s building with Toyota in Alabama.
- Daimler: Employs more than 24,000 in the U.S. across operations including its Mercedes-Benz passenger vehicle and van businesses, financial services unit and research-and-development operation. “New tariffs on imported parts will result in a reduction of vehicles being produced in Alabama. Lower production volumes will result in fewer shifts with fewer U.S. employees”
- Volkswagen: Employs about 3,500 at plant in Tennessee and directly supports almost 50,000 U.S. jobs.
Job Losses
It is crystal clear there will be tens of thousands of job losses if Trump goes through with his idiotic plan.
There will not be comparable gains for US companies. Even GM and Ford are against the tariffs.
If you think this is a good tactic related to the “Art of the Deal” you are truly mistaken. Trump is clueless on trade.
Mike “Mish” Shedlock
Hold on — it was just announced that there will be no changed tariffs on car imports. It seems that once again everyone got fooled by vaporware…BTW does anyone remember seeing the “military parade” on Novembe 10th — It seems that that too was vaporware.
Starting to think that Trump is all about show and no substance.
Public/Private partnerships,,, government choosing winners and losers…
“How can we conduct economic policy when the chief negotiator is capricious and unstable?”
Excellent point
The Chief Negotiator has been crystal clear and totally consistent about the strategic objective — reduce the unsustainable trade deficit by increasing production in the US.
He has also displayed great tactical flexibility around working towards this consistent strategic goal. For the poor punters on the other side, this must be a little bit like facing an attack from General Rommel.
The weakness in the US position is the dysfunctional US educational system and the counter-productive, often internally contradictory, excessive regulatory system. Those are the main obstacles to investing in US productive capabilities. Sadly, the Political Class which built those monstrosities does not want to tear them down. Insufficient opportunities for graft, as Professor Reynolds would say.
The US runs a huge imbalance in auto trade — which standard economic theory says should be one of the high-tech products that an advanced economy sells to other countries. It is obvious to a blind dog on a dark night that the tariffs are intended to get other countries to negotiate their way to fair trade. That is tough when previous administrations have unilaterally surrendered and given other countries an advantaged position. The trade war started a long time ago; finally, in President Trump, the US has someone who will fight back.
So there will be a lot of noise, some pain, and at the end the world will be a better place.
So you support big government?
What has big government got to do with it? Governments big or small have to decide what terms of trade they want, and how to negotiate with other countries to achieve those terms of trade.
The ideal is free trade, but personally I would settle for fair (reciprocal) trade as a stepping stone to free trade.
Once you get past the silly slogans, there are a number of knotty problems in defining free trade. For example, is it moral for a person who marches in support of a $15/hr minimum wage in the US to wear sneakers made in Vietnam by some poor schlub who gets $1/day? And let’s not even get into the issues of whether free trade requires free movement of capital and labor and Intellectual Property as well as goods and services. Does free trade require a borderless world?