SEMA eNews Vol. 21, No. 22, May 31, 2018

Trump Administration Considers Tariffs on Imported Cars

By SEMA Washington, D.C., Staff

President Trump directed the U.S. Department of Commerce to investigate whether imported cars and auto parts pose a national security threat justifying tariffs of up to 25%. The Commerce Department will “consider whether the decline of domestic automobile and automotive parts production threatens to weaken the internal economy of the United States, including by potentially reducing research, development and jobs for skilled workers in connected vehicle systems, autonomous vehicles, fuel cells, electric motors and storage, advanced manufacturing processes and other cutting-edge technologies.” The Commerce Department has nine months to complete the investigation and issue a report, after which the president will have three months to decide what actions, if any, to take.

According to U.S. government statistics, about 12 million cars and trucks were produced in the United States in 2017, while 8.3 million vehicles were imported. Most of the imports were from Mexico (2.4 million), Canada (1.8 million), Japan (1.7 million), South Korea (930,000) and Germany (500,000). The United States exported nearly 2 million vehicles last year. Imports from Mexico and Canada would not be covered by the tariffs if the NAFTA Accord remains in place.  

Section 232 of a 1962 U.S. trade law provides authority to launch the national security investigation, and was the basis for tariffs imposed in March on steel (25%) and aluminum (10%). The steel/aluminum tariffs are global, although allied countries with free trade practices are exempt. June 1 is the current deadline for countries to negotiate an exemption. To date, only Argentina, Australia, Brazil and South Korea are exempt. Companies may seek one-year tariff exclusions if it can be demonstrated that U.S. producers don’t offer the specific type of steel or aluminum needed. More than 9,000 exclusion requests have been filed to date.

In a separate action, the 25% tariffs under consideration for certain products from China would be authorized under Section 301 of the trade law, which applies to unfair trade practices, such as intellectual property theft. The U.S. Trade Representative has tentatively identified 1,300 types of Chinese products worth around $50 billion that would be subject to the tariffs if U.S./Chinese negotiators are unable to resolve the dispute. The final product list is expected to be announced by June 15, with tariffs to be imposed shortly thereafter.

SEMA opposes the steel/aluminum tariffs and threatened Chinese tariffs as misplaced and having the potential to impose significant harm on U.S. businesses and consumers. The imported auto/parts investigation is similarly misguided, and could threaten global trade and complex supply chains. While it is important to identify and challenge unfair trade practices, tariffs are a heavy-handed form of taxation that lead to unintended trade retaliation and loss of American jobs. 

For more information, contact Stuart Gosswein at stuartg@sema.org.

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