As President Donald Trump studies a Commerce Department report on the impact of car imports, lawmakers and industry groups are bracing for yet another hit on trade.
On Sunday, the Commerce Department sent Trump its long-awaited report on whether or not to impose new duties on imported vehicles under a national security rationale. The report’s contents have not been released to the public or apparently to members of Congress.
Senate Finance Chairman Charles E. Grassley of Iowa told reporters Tuesday he did not have a copy of the report but would request one. The Finance Committee heads Senate oversight on trade issues.
Trump, who has repeatedly threatened to levy new duties on foreign-made cars, particularly from the European Union, has 90 days to review the Commerce Department’s recommendations. He is not required to act on them, however.
If the department determined there are national security concerns, the report sent to the president would include recommendations that could include tariffs.
Grassley, who has been critical of steel and aluminum tariffs imposed for national security reasons under Section 232 of the Trade Expansion Act of 1962, said it is “ludicrous to think that under 232 ... there is justification for putting tariffs on cars. It would be subterfuge to use 232 to put tariffs on cars.”
The Alliance of Automobile Manufacturers, which has a membership of U.S. and foreign car and truck makers, said Section 232 tariffs would hurt a core U.S. industry.
“In addition to burdening our customers, tariffs seriously jeopardize the vitality of our nation’s auto sector,” the organization said in a Feb. 14 statement. “Increased prices drive down vehicle demand, which leads to lower production and ultimately job losses — as many as 700,000 jobs with widespread impact across manufacturing, suppliers, and dealers across all 50 states.”
It added that “This move also invites retaliation from our trading partners, which will spread the economic pain across other sectors throughout America, including agriculture.”
Sen. Ron Wyden of Oregon, the ranking member on the Finance Committee, called for the White House to release the Commerce Department report.
“American families, small businesses, farmers and ranchers have a right to know what Donald Trump is considering when it comes to slapping tariffs on cars and trucks and even on parts used to assemble autos in the U.S.,” Wyden said in a statement Tuesday.
He also said car tariffs could backfire on Trump if they embolden lawmakers to back legislation that would give Congress more oversight of Section 232 tariffs.
In comments on the Senate floor last week, Grassley said the Trump administration should be wary of weakening an industry that supports 10 million jobs and accounts for 3 percent of the U.S. gross domestic product. The U.S. is the world’s second largest car sales market and production site.
Grassley cited a Tax Foundation study that calculated that a 25 percent auto tariff — as Trump has threatened — would amount to a $73.1 billion tax increase on consumers and businesses. The Center for Automotive Research in a February report estimated that broad-based auto tariffs could result in car costs jumping by as much as $2,750 and up to 1.3 million fewer cars being sold in the U.S.
The center says the average vehicle produced in the U.S. has 40 to 50 percent foreign content.
In 2017, the U.S. auto industry, a mix of domestic companies and foreign manufacturers with U.S. plants, sold 17 million vehicles domestically. The industry exported 1.9 million vehicles. Altogether, the U.S. in 2017 imported 8.3 million vehicles, the bulk of which came from Mexico, Canada, Japan, South Korea, Germany and the United Kingdom, according to the International Trade Administration.
“In short, raising tariffs on cars and parts would be a huge tax on consumers who buy or service their cars, whether they are imported or domestically produced,” Grassley said.
EU prepared to retaliate
Under the 1962 law, the Commerce Department delved into whether imported cars, SUVs, vans and light trucks and components have undermined U.S. manufacturers, U.S. technological innovation and the U.S. economy.
Commerce Secretary Wilbur Ross initiated the review in May 2018, a day after Trump asked him to consider an investigation into the effect of foreign vehicles on national security. Over the past year, Trump has threatened to slap tariffs on cars from Canada, Mexico and the European Union with Germany, a member of the bloc, drawing most of the president’s ire. Trump argues that trading partners limit access for U.S. auto exports.
At the end of their renegotiation of the North American Free Trade Agreement last year, Canada and Mexico essentially took out insurance against the possibility of U.S. car tariffs. They agreed to quotas for their auto exports to the U.S. that would take effect if tariffs are imposed. Canada and Mexico would be allowed to export 2.6 million vehicles per country per year.
Trump put the possibility of auto tariffs on European vehicles on hold in 2018 while the U.S. and the EU began talks for a trade agreement. A EU spokesman said on Monday that Europe would maintain the truce as long as the U.S. abides by the terms. However, the spokesman said that if the Commerce report “translates into actions detrimental to European exports, the European Commission would react in a swift and adequate manner.”
The U.S. now levies a 2.5 percent tariff on most auto imports and 25 percent tariffs on imported light duty trucks.
The Commerce report comes amid strong objections to tariffs from lawmakers, auto makers, auto dealers, repair shops, consumers and companies that supply car manufacturers.