July 23, 2018

Auto Tariffs Would Cause Manufacturing In Both U.S., Canada To “Grind To A Halt”

Stakeholders had an opportunity last week to tell representatives from the U.S. Commerce Department how they felt about the Trump administration’s proposed tariffs on automobiles imported into the United States.

Kirsten Hillman, Canada’s deputy ambassador to the United States, and Ontario cabinet minister Jim Wilson were among those who testified. Both opposed the penalties and said Canada would be forced to retaliate if the Trump administration moved forward. Hillman argued, “Maintaining open trade in autos and auto parts between our countries is crucial to the economic well-being of our companies, our communities and our workers, which, in turn, supports our collective security. We urge you to reflect on these matters as you prepare your recommendations.”

Officials from Mexico, Turkey, Japan, South Korea, Malaysia, South Africa, and Taiwan also testified against the proposed penalties. Of the 45 witnesses at the hearing last week, only one testified in favor of the Trump administration policy.

Alliance for Automobile Manufacturers Vice President Jennifer Thomas noted an industry analyses by her group found a 25 percent tariff would raise the price of a car imported into the United States nearly $6,000 and the price of a U.S.-built car $2,000. Thomas argued, “This would equate to an $83 billion tax on U.S. consumers that would trigger a domino effect on the industry and economy. When vehicle prices rise, demand drops. Lower demand means less production.”

As Politico reports, a forthcoming paper by the Peterson Institute for International Economics estimates the proposed penalties would raise car prices by $1,408 to $2,057 for a $17,000 vehicle, $2,093 to $3,066 for a $22,500 vehicle, and $4,708 to $6,972 for a $35,000 vehicle. Outside of the Commerce Department’s hearing, experts and policymakers also worried about the impact of the proposed auto penalties.

In a radio interview Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, said it would take only 30 days for work at automotive assembly plants, parts manufacturers, and other industry businesses on both sides of the U.S.-Canada border to “grind to a halt.” Volpe also said the tariffs would mean “a slow death” for the Canadian auto manufacturing industry.

Additionally, in a letter to Commerce Secretary Wilbur Ross, a bipartisan group of 149 members of Congress warned that penalties imposed on the industry would damage the overall economy. After the Commerce Department hearing, an official with the agency said the Trump administration’s final decision on this matter would be coming in a matter of “weeks.”