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Trump's auto tariffs will cost consumers $83 billion, insiders tell Commerce in hearing

"Our economic future is tied to being able to make goods and services in the United States and provide them to people abroad.”
Image: Ford assembly line
The 2018 Ford Expedition SUV goes through the assembly line at the Ford Kentucky Truck Plant on October 27, 2017 in Louisville, Kentucky.Bill Pugliano / Getty Images file

President Donald Trump's threat to impose punitive tariffs on imported vehicles and auto parts will cost American consumers $83 billion, warned representatives from the auto industry at a Congressional hearing.

"Higher auto tariffs will harm American families and workers, along with the economy," said Jennifer Thomas, vice president of federal government affairs at the Alliance of Automobile Manufacturers.

Thomas's comments come as the Commerce Department responded to an investigation that will determine justification for its plan to implement tariffs based on national security grounds.

The notice of the investigation elicited nearly 2,300 comments from manufacturers and sellers of cars and car parts, automotive hobbyists and many average Americans, with much of the commentary criticizing protectionist sentiment and expressing concern that they would be the ones bearing the costs.

“Even for cars that are assembled in the U.S. and have a U.S. brand, the amount of foreign parts and components in these cars are substantial,” said Monica de Bolle, a senior fellow at the Peterson Institute for International Economics. “Even for those U.S.-assembled cars, it would have a significant impact on the price.”

The auto industry has already crunched those numbers: The AAM said a 25 percent tariff would make an imported car cost $6,000 more, and an American-made car $2,000 more. The National Automobile Dealers Association said auto tariffs could raise the average price of a car by $4,400 and eliminate more than 700,000 jobs.

Peterson’s de Bolle said a great deal hangs in the balance for the hearings, which conclude Friday. “This can only escalate unless carmakers in the U.S. can come convince the administration that there’s no win here,” she said.

“The parts and services my company manufactures in the U.S. and sells to our customers located in the U.S. are not a threat,” said Kirk Gadberry, president COO of Illinois-based North American Lighting. “I can’t possibly understand how an industry so vital to the strength of our nation’s economy can possibly be construed as a threat to our national security.” Gadberry said his company, which sells parts to many major auto manufacturers, makes its products in the United States but relies on imported components in some cases.

Mike Mansuetti, president of the American arm of German auto parts manufacturer Bosch, said that auto tariffs would put his division’s 18,000 jobs at risk. “Motor vehicle parts manufacturers rely on open market and integrated supply chains,” Mansuetti said in his comment letter, calling the national security grounds of the investigation “misguided.”

Corporate pleas for the Commerce Department to reconsider its stance weren’t limited to the automotive sector. Other industries worried about the impact of retaliation on their business, as the European Union’s trade commissioner said on Thursday that Europe was preparing retaliatory measures if the U.S. moves ahead with these tariffs.

Agricultural trade group U.S. Wheat Associates submitted a comment letter saying, “The U.S. wheat industry is highly dependent on exports.” The trade group warned, “The chances that U.S. wheat farmers will face retaliation increases substantially if the final measures reflect the scope of the investigation.”

Trade experts said that although the direct impact of import tariffs on the automotive sector would be substantial, those would be eclipsed by the economic ripple effects of retaliatory trade sanctions.

"Strategically, the U.S. is a big economy, but 85 percent of growth is outside of the U.S.,” said Joseph Parilla, a fellow at the Brookings Institution’s Metropolitan Policy Program. “We should be kind of concerned about that, because our economic future is tied to being able to make goods and services in the United States and provide them to people abroad.”