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U.S. car buyers could face higher prices from import tariffs, auto industry warns

The latest wave of concern was triggered by the Commerce Department’s confirmation that it had delivered on Sunday a long-awaited report to President Donald Trump.
Inside Car Dealerships Ahead of Motor Vehicle Sales Figures
Hyundai vehicles sit on display for sale on the lot of the Keyes Hyundai dealership in the Van Nuys neighborhood of Los Angeles on Jan. 2, 2016.Patrick T. Fallon / Bloomberg / Getty Images file

Automakers, car dealers and parts manufacturers have gone into high gear in a bid to derail the threat of new tariffs on foreign-made cars and car parts.

The tariffs, they warn, could backfire, raising prices for U.S. consumers and sending the domestic automotive market into a tailspin.

The latest wave of concern was triggered by the Commerce Department’s confirmation that it had delivered on Sunday a long-awaited report to President Donald Trump that looked at whether foreign autos and auto parts pose a threat to national security. Trump has indicated that if the report backs up that conclusion, he may impose tariffs expected to run as high as 20 to 25 percent.

While Detroit’s Big Three automakers have raised concerns about foreign-made vehicles over the past several decades, “not a single company in the domestic auto industry requested this investigation,” the Motor and Equipment Manufacturers Association, a trade group representing a broad alliance of automotive companies, said in a statement.

“These tariffs, if applied, could move the development and implementation of new automotive technologies offshore, leaving America behind,” MEMA added in its statement, while other industry groups warned that with prices likely to rise even on vehicles assembled in the U.S., the potential impact of import auto tariffs could be substantial.

In a global business environment, industry leaders have repeatedly pointed out that even supposedly American-made vehicles would be impacted by tariffs. Toyota has warned that a Camry sedan assembled in Kentucky could jump in price by an average $1,600 if taxes of 25 percent were put on imported parts and components. These range from windshield wipers and batteries to engines and transmissions. A Mercedes-Benz S-Class produced in Germany would jump in price by $20,000 or more.

New tariffs would arrive at a difficult time for the auto industry. The U.S. new vehicle market suffered its first decline of the decade in 2017. Sales rebounded slightly in 2018, but industry analysts including LMC Automotive and IHS Markit are forecasting another dip this year.

Trump began raising concerns about automotive imports early in his presidential campaign. While he initially focused on Mexican-made vehicles, he has broadened out the scope of his concerns since entering the White House.

Billions of dollars of cars and automotive parts were covered by trade tariffs on China. Now, other trade partners including Germany and Japan could be in the crosshairs.

“I love tariffs, but I also love them to negotiate,” Trump said Friday. He has referred to himself as a “tariff man” in the past.

Unlike the trade war with China, the president has focused on what he has called a potential threat to national security caused by automotive imports. That required him to seek an analysis by the Commerce Dept. under Section 232 of the Trade Expansion Act. The agency had 270 days to complete the study and, after several delays, delivered its report to the White House two hours before the deadline.

No details have been released, but the auto industry appears to be going under the assumption that the White House will impose some form of tariff on auto trade partners.

“Unfortunately, the report has not been made public, highlighting, once again, the bogus nature of this investigation,” said Cody Lusk, president and CEO of the American International Automobile Dealers Association, in a statement. The group noted that it represents 9,600 international nameplate dealership franchises and their 578,000 American employees.

In a comment that reflects the broader concern of the American auto industry, Lusk said the completion of the report forces AIADA members “to operate under a cloud of uncertainty, not knowing if at any moment their products will be slapped with 25 percent tariffs, raising vehicle and repair costs by thousands of dollars and slashing sales.”

In decades past, Detroit-based automakers have raised concerns about trade imbalances, but they have sided with their import rivals on 232-based tariffs.

Noting the “pivotal role” of the industry in the American economy, former Missouri Gov. Matt Blunt, the president of the American Automotive Policy Council, said in a statement: “We believe the imposition of higher import tariffs on automotive products under Section 232 and the likely retaliatory tariffs against U.S. auto exports would undermine – not help – the economic and employment contributions that Fiat Chrysler, Ford and General Motors make to the U.S. economy.”

Trump has not indicated when he will publicly respond to the Commerce Dept. study.