Car tariffs

‘This would widen the trade war tenfold’: U.S. automakers say no to Trump’s car tariffs

America’s carmakers are wary as they watch what’s happening to other companies caught in Trump’s trade war.

By MEGAN CASSELLA

President Donald Trump says he wants to save the U.S. auto industry by slapping tariffs as high as 25 percent on foreign-made cars, but there’s a problem: Automakers don’t want his help.

The White House thinks the penalties would encourage domestic investment and automotive production and support U.S. workers — and Trump is pressing his staff to speed up the move so he can claim credit for it before the midterm elections.

But America's carmakers, including Ford, General Motors and Fiat Chrysler, are wary as they watch what’s happening to other companies caught in Trump’s trade war, such as Harley-Davidson. The motorcycle maker suddenly found the European Union imposing tariffs on its U.S.-manufactured products after Trump instituted penalties on steel and aluminum from Europe. And Trump began attacking the company on Twitter this week after it announced it would move some jobs abroad to avoid the fallout.

The auto industry is also raising concerns about the intricacy and global nature of how cars and trucks are made, with parts crossing borders many times to build one automobile. Domestic and foreign brands alike are concerned that penalties would disrupt sales and hurt their bottom lines.

Unlike the steel and aluminum tariffs — where some companies, unions and lawmakers offered measured support for the president’s attention and protection — there is near-unanimous opposition among those same groups against the push to impose tariffs on cars.

“I can’t find a single company that is calling for protection from international competition,” said John Bozzella, president and CEO of Global Automakers, a D.C.-based lobbying group. “I don’t see it. There’s isn’t a single company. And frankly, there isn’t a single group of employees that has called for this either.”

A tax on foreign autos could have far deeper impacts than the steel and aluminum duties Trump has already imposed. The U.S. imported some $360 billion in cars, car parts and engines last year, compared to $29 billion in steel and $18 billion in aluminum.

“This would widen the trade war tenfold,” said Rufus Yerxa, a former trade official who now leads the National Foreign Trade Council. “It’s a whole different ballgame from steel.”

The probe is geared at helping domestic brands, but even the Big Three automakers are making it clear they aren't asking for tariff protection. Joe Hinrichs, Ford’s executive vice president and president of global operations, told POLITICO in a recent interview that officials there are encouraging governments to lower tariffs rather than raise them, "because we believe that free and fair trade leads to economic growth and provides the most opportunity."

With the Commerce Department working to complete an investigation as soon as next month into whether auto tariffs are needed to protect U.S. national security, automotive companies and industry groups are banding together to launch what they describe as an educational and advocacy push to show how tariffs would ultimately cause more harm than good.

And with foreign countries like those in the European Union almost certain to respond to any car tariffs with penalties of their own on U.S. products, sectors like the agricultural industry and consumer product groups are also joining in the effort to try to head off duties before they face tariffs like those already imposed on lipstick, orange juice and Harley-Davidsons.

“We don’t want to attack the administration, per se,” said Jennifer Thomas, a vice president of the Alliance of Automobile Manufacturers, which has taken a leadership role in organizing opposition. The alliance represents Ford, General Motors and Fiat Chrysler — as well as international brands like Mazda and Toyota.

“We don’t want to take that sort of aggressive tactic, but we want to be clear on the wisdom of tariffs. We don’t think tariffs are the right approach,” Thomas said, adding that the focus will be on correcting what she sees as a “fundamental misunderstanding” of what the auto industry looks like today.

Most cars made in the U.S. today are composed of only about 75 percent U.S. content, for example, meaning manufacturers would still have to pay the tariffs on the remaining 25 percent of parts. Of the top 10 domestically produced cars with the most U.S. content, four are made by the Japanese brand Honda.

A 25 percent tariff, as the administration has threatened, would lead to a loss of 195,000 jobs in the U.S. auto industry over a three-year period, as production would drop off by 1.5 percent, according to a recent study from the Peterson Institute for International Economics. The study projected that if other countries retaliate, U.S. job losses could reach 624,000.

Industry groups have been meeting regularly to organize the pushback effort, which is expected to roll out in the next couple of weeks. While part of the focus is working with Congress and governors of automotive states, the primary target is the White House — and, specifically, Trump himself.

“This is unusual because it’s so uniquely focused on the executive branch,” one industry official involved in the effort said. “There’s a unique challenge here, which is that the audience of the advocacy is one person in the Oval Office.”

Part of the reason industry sees little reason to focus on Capitol Hill is that members of Congress have already begun to criticize the administration’s decision and even to launch an investigation into auto and auto part imports. Traditionally sympathetic members of the GOP like Senate Finance Chairman Orrin Hatch of Utah, who has until recently held his tongue on many of Trump’s trade decisions, criticized the tariffs as “a tax on American families” and warned that a 25 percent tariff could erase roughly 10 percent of the annual income of an average family.

Sen. Sherrod Brown (D-Ohio) — who has been aligned with Trump’s more protectionist trade moves in the past, including his decision to impose duties on steel and washing machines — is also trying to steer Trump toward a different outcome this time around. "I think it's hard to argue that auto production is a national security issue," Brown said last week.

But so far, at least, the administration has paid little attention to the calls to back off and shown little interest in changing its mind. Commerce Secretary Wilbur Ross, who is leading the probe and will ultimately make the recommendation to Trump as to whether to impose tariffs, told reporters last week that the investigation could wrap up as soon as late next month.

And Trump has expressed a desire to have something to act on well before the midterm elections in November, viewing any potential tariffs as a way to position Republicans as pro-worker.

“We are finishing our study of Tariffs on cars from the E.U. in that they have long taken advantage of the U.S. in the form of Trade Barriers and Tariffs,” he posted on Twitter on Tuesday. “In the end it will all even out — and it won’t take very long!”