Are vehicle imports damaging the American auto industry and national security? It depends on who you ask. Earlier this week, the Trump administration announced it would be conducting a probe to determine whether the introduction of auto import tariffs of up to 25 percent could help protect U.S. automakers’ fortunes as well as national security. The probe – and the potential tariffs – are drawing strong criticisms from the business community. Foreign-built cars and trucks now comprise 40 percent of the auto U.S. market.
“If this proposal is carried out, it would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war,” U.S. Chamber of Commerce President and Chief Executive Officer Thomas Donohue said in a statement. “In fact, the U.S. auto industry is prospering as never before. Production has doubled over the past decade, it exports more than any other industry, and it employs nearly 50 percent more Americans than it did in 2011. These tariffs risk overturning all of this progress.”
The investigation is being launched under Section 232 of the Trade Expansion Act of 1962, the same legislation the Trump administration used to slap tariffs on imported aluminum and steel. The Act was originally implemented in part to determine whether the imports of any good and services “harm national security.” In addition to the Chamber of Commerce, many American carmakers and legislators, including high-profile Republicans, expressed disapproval of the investigation and the tariffs and trade wars it could bring.
“The president needs to use the national security waiver in ways that I think visibly meet the test,” said Senator Roy Blunt (R., MO). “I didn’t think aluminum and steel met the test. I certainly don’t think automobiles meet the test.”
Senator Orrin Hatch, the Republican chairman of the Senate committee that oversees taxes and trade, called the White House’s move on auto imports “deeply misguided.”
Senator Bob Corker (R., TN) went further, calling the move “politics.”
“There is no reason to use this provision to consider imposing tariffs on the automobile industry, and this appears to be either an attempt to affect domestic politics ahead of the [November midterm] election, or for some other transactional purpose regarding ongoing trade discussions,” said Senator Corker in a social media post.
As the auto supply chain is global today, many vehicles made in the U.S. contain parts made abroad, and many foreign-built vehicles contain parts made in the U.S. This means that almost no cars built in the U.S. would be able to escape the foreign tariff penalty.
The White House has not yet provided details of how it plans to justify the tariffs on vehicle imports as a threat to national security. The Commerce Department now has 270 days to complete a report that will be required before the Trump administration can establish the tariffs.