Opposition from US businesses to auto tariffs
The US Department of Commerce began a hearing last week that investigated the proposed 25-percent tariff on auto imports. Freedom Partners Chamber of Commerce and Americans for Prosperity submitted formal comments prior to the hearing, writing the policy “is based on faulty premises and bad economics.”
The department, at the request of President Donald Trump, is currently investigating whether tariffs should be imposed on auto imports on national security grounds, under Section 232 of the Trade Expansion Act of 1962.
“American consumers do not buy cars from countries that are enemies (or even potential enemies) of the United States,” the comment said. “There is no risk of a shortage of either cars or car parts. In addition, the Chamber of Commerce notes that the automotive industry is strong, with production doubled over the last decade and employment up by 50 percent over the last seven years, making these protections not only unnecessary, but harmful to the US auto and parts industry.”
The national security predicate of the Section 232 investigation, at least according to some proponents is that imports should be restricted so that there will be more American industrial capacity in case of war. “But if there is a sudden need to produce tanks, jet fighters, missiles, and other military equipment, the constraint will be specialized production equipment, not factory space,” the comments said. “In other words, taxes on autos and auto parts won’t make a difference in military preparedness.”
The proposal should be judged based on conventional economic analysis, the comments asserted. “Heavy tariffs on autos and auto parts will lead to inefficiency and job losses,” the comments concluded. “On both points, the proposal should be rejected.”
At Friday’s hearing, Cody Lusk, the president and CEO of the American International Automobile Dealers Association (AIADA), testified that the proposed tariffs held the fate of 577,000 US jobs and 9,600 auto dealers in the balance.”
“AIADA respectfully disagrees with the position that imported autos and auto parts are being brought into the United States in such quantities or under such circumstances as to threaten to impair the national security,” said Lusk. “AIADA and its 9,600 American auto dealers strongly support a pro-growth economic agenda, and believe it can be accomplished with a positive trade message, not the threat of tariffs.”
The international auto industry has invested $75 billion in US operations and more than doubled its production in the US over the past 15 years. In 2016, 5.5 million vehicles were built by Americans at these factories, 925,000 of which were exported to over 140 countries.
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