Just the Facts

Five Facts on Auto Tariffs

By Emma Petasis
July 5, 2018 | Blog

In May the U.S. Department of Commerce announced that it was initiating an investigation into passenger vehicles and parts to see whether imports were hurting the American automobile industry to a degree that posed a threat to the country’s “internal economy.” The threat of automobile tariffs has opened a fierce debate on their effects on the U.S. and global economies.  Here are five facts on auto tariffs.

The Trump administration has threatened to levy global auto tariffs—upsetting many U.S. allies

President Trump has been considering a 20% tariff on all imported cars, including those from the European Union. Currently, the United States is the largest importer of cars in the world. Manufacturers in Germany are expected to face the greatest impact, as they ship the most cars to the U.S. Tariffs would also impact American companies that produce auto parts abroad.

The trade dispute dates back to May, when the U.S. imposed a 25% tariff on steel and a 15% tariff on aluminum imports from the European Union

On May 31 President Trump announced his intention to impose tariffs on steel and aluminum imports on countries around the world, including the countries that make up the European Union. President Trump made the move in an attempt to boost U.S. manufacturers and lower the U.S. steel-trade deficit, which amounted to 24.6 million metric tons in 2017.  Soon thereafter, the EU imposed retaliatory tariffs on U.S. goods like bourbon whiskey, motorcycles, and orange juice— affecting around $3.3 billion worth of American exports.

The EU has stated it would impose tariffs on $294 billion worth of American goods if President Trump were to go through with the auto tariffs

The retaliatory tariffs would target a wide array of U.S. goods totaling 19% of U.S. exports for 2017. These exports would include goods like steel and agricultural products, such as peanut butter and cranberries.

President Trump has argued that the tariffs will help promote automobile production in the United States

President Trump has stated that the tariffs are going to motivate car manufacturers “to build their cars in America.” He has received some support from groups like the United Automobile Workers union (UAW).  Shortly following the President’s announcement that his administration was considering automobile tariffs, UAW President Dennis Williams stated “I welcome the fact that they’re investigating this.”  However, the UAW has also warned that “rash actions could have unforeseen consequences, including mass lay-offs, for American workers.”

Critics of the tariffs argue that they pose a significant risk to the U.S. economy

In a letter to the U.S. Department of Commerce, the European Commission estimated that due to the importance of the car industry, imposing a 25% tariff on auto imports would cause U.S. GDP to take a $13-$14 billion hit.  According to global automakers, the price of imported vehicles would increase by $6,000 per car. Additionally, both General Motors and BMW, whose largest plant is in South Carolina, warned that the trade disputes would cause major plants in the U.S. to close, leading to job losses.  The U.S. Chamber of Commerce – traditionally an ally of the Republican Party released an analysis arguing that “tariffs are beginning to take a toll on American businesses more tariffs [will] only lead to a trade war that will cost American jobs and economic growth.” Matt Blunt, the president of the American Automotive Policy Council, also released a statement— saying that “despite the U.S. government’s good intentions, America’s automakers strongly believe any increase in automotive tariffs could interfere with the ongoing success of American automakers.”

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