Is The American Automobile Industry Worth Saving?

Auto industry analysts and advocates say American consumers will be hurt if President Donald Trump follows through on using "national security" concerns about declining manufacturing jobs to justify adding a major tax on imported trucks, cars and auto parts.

Loading...

Load Error

They say his call for tariffs reflects a lack of understanding of the intricacy of the auto supply chain, and expressed alarm at Trump's move Wednesday to order a Commerce Department investigation of the possibility. 

"This is a huge deal," said Kristin Dziczek, vice president of Industry, Labor & Economics at the Center for Automotive Research in Ann Arbor, Mich. "U.S. sales were 17.3 million last year, but the country only produced 11 million light vehicles."

About 2.4 million of those vehicles were exported, mostly to Canada and Mexico, so, Dziczek noted, 8.7 million, or 44% of the cars, SUVs and light trucks sold in the U.S. last year were imported. 

"Many of the Canadian and Mexican imported vehicles have U.S.-made engines, transmissions and other major parts and components," Dziczek said. "The biggest exporters from the U.S. to both EU and China are BMW and Daimler."

More: Trump extends exemptions on steel, aluminum tariffs

More: Trump calls for new tariffs on imported cars and trucks, escalating trade wars

More: Where are small-government Republicans when Donald Trump attacks Amazon and Jeff Bezos?

John Bozzella, CEO of the Association of Global Automakers, called it “a bad day for American consumers."

His group, which represents foreign automakers and parts makers doing business in the U.S. plus some domestic suppliers, issued a statement immediately condemning Trump's order.

"The U.S. auto industry is thriving and growing," he said. "Thirteen, soon to be 14 companies, produced nearly 12 million cars and trucks in America last year. To our knowledge, no one is asking for this protection. This path leads inevitably to fewer choices and higher prices for cars and trucks in America.”

Trump, who used the same provision of trade law, Section 232 of of the Trade Expansion Act of 1962, to impose tariffs on steel and aluminum, revealed that plan with steelworkers by his side. This plan, auto executives say, blindsided them.

Trump in March rolled out 25% tariffs on steel imports and 10% on aluminum, but offered temporary exemptions to the European Union, Canada, Mexico and a number of other allies. India and China are challenging the tariffs before the World Trade Organization, Reuters reported.

Analysts wondered whether Trump's auto announcement wasn't both an effort to gain leverage in stalled trade negotiations and a play for votes in the industrial north — Michigan, Pennsylvania, Ohio and Illinois — as political parties vie for control of statehouses and the U.S. House as they head into a volatile midterm election cycle. 

Others wondered if he was mainly seeking leverage in talks to revise the North American Free Trade Agreement with Canada and Mexico, a deal he has deemed unfair and has vowed since the 2015-16 campaign to renegotiate. 

Trump teased the announcement in a tweet Wednesday morning, promising "big news" for U.S. autoworkers. 

"After many decades of losing your jobs to other countries, you have waited long enough!" he wrote. 

A spokesman for the UAW declined to comment.

Replay Video
>>>>>UP NEXT1Cancel
SETTINGSOFF
HDHQSDLO
Analyst: Everyone loses in U.S.-China trade war>USA TODAY See more videos
SHARESHARETWEETSHAREEMAIL
What to watch next
UP NEXT UP NEXT

Investigation ordered

The president announced late Wednesday that he asked Commerce Secretary Wilbur Ross to investigate whether auto imports are a threat to national security. 

"Core industries such as automobiles and automotive parts are critical to our strength as a Nation," Trump said in a short statement released by the White House Press Office.

Imposing tariffs through Section 232 is not fast. He ordered the Commerce Department to investigate steel imports in April 2017, 11 months before he imposed tariffs. 

The Detroit 3 and others deferred to their advocacy group, the Alliance of Automobile Manufacturers, which declined to put out a statement immediately. It represents a group that's concerned about antagonizing the president.

Still, said Michelle Krebs, executive analyst for Autotrader, "It is unclear if this will reach fruition as there clearly will be loud objections from many."

More: Struggling German bank Deutsche Bank to cut an additional 7,000 jobs by 2019

More: What's the strangest Social Security benefit you can get? A $255 lump sum death benefit

Dave Sullivan, manager of product analysis at AutoPacific Inc., said the call for tariffs reflects a lack of understanding about how the industry works.

"There is no vehicle manufactured in the U.S. today that doesn't have at least one part from outside the U.S.," he said. "Every vehicle assembled today requires a logistical symphony due to the far corners of the world that some parts come from. With the exception of Tesla, every vehicle manufacturer imports and exports vehicles based on U.S. consumer demand. GM and Ford have vehicles that come from Asia or Europe. Some are so low volume that they don't warrant manufacturing capacity in the U.S. to support it."

Sullivan said, "This has the potential to reach far and wide and provide little to no benefit to U.S. consumers. This could also be the last straw for an all out trade war, as many countries are growing tiresome of threats."

Fact is, there are also some jobs that Americans just don't want to do, analysts said, such as hand stitching the leather of steering wheels or soldering printed circuit boards in a job market that is already strained with low unemployment.

"This could really backfire," Sullivan said. "Also, the auto industry is very cyclical and if more manufacturing was moved to the U.S., we'd just increase our dependence and exposure to the waves of auto manufacturing and demand."

American automaking is thoroughly integrated into a global system of vehicle and parts production now.

"Republicans used to be supporters of free trade. I'm not sure where that got lost in this administration," Sullivan said.

'We weren't briefed'

An industry official who is not authorized to speak publicly said blue-collar workers will like what they hear from Trump because it sounds like it supports jobs in America.

"Fact is, we weren't briefed on this. We didn't ask for it. Who was in the room?" the industry official said.

Analysts also wondered if Trump doesn't genuinely think the tariff threats will be effective. Just this week, China significantly reduced its auto import tariff on vehicles.

China cutting auto import taxes as of July 1

"When the auto executives visited the White House, the president talked about imposing tariffs on imports. So the idea isn't new, but now they are offering a mechanism to implement it," the industry official said. "This allows for executive action, unilateral action."

The industry official said, "We'll see. It's a risky strategy."

Michigan lawmakers on Capitol Hill were slow to respond to the president's latest comments but U.S. Rep. Debbie Dingell, D-Dearborn, reiterated a position held by many Midwestern Democrats: If the threat of tariffs leads to talks that can help domestic automakers, it might be worth it. 

"American workers and automakers deserve the same access to markets in other countries that foreign companies have in the U.S. My hope is at end of this process they finally meet this goal," Dingell said.

Everyone seems to agree that the best thing to do in the short term is wait and see what unfolds over the next six to 12 months, when a review must be completed to determine whether actions based on national security are justified.

Jonathan Smoke, chief economist at Cox Automotive, said, “We are all learning that initial bluster can be just that, so time is needed to see what will actually come to pass. Like threats of changes to country of origin numbers in NAFTA, the impact to the industry would vary. A new import tariff would hurt luxury models the most. A tariff would raise prices and limit consumer choice but would encourage more domestic production. There would be winners and losers from such a move throughout the value chain if it comes to pass.”

Replay Video
>>>>>UP NEXT1Cancel
SETTINGSOFF
HDHQSDLO
China compromises seen in U.S. trade talks>USA TODAY See more videos
SHARESHARETWEETSHAREEMAIL
What to watch next
UP NEXT UP NEXT

Foreign companies in U.S.

Domestic automakers now build vehicles in China, South Korea and other overseas locations and then ship them back to America.

And the foreign-based car companies point out that they employ hundreds of thousands of Americans in manufacturing operations and car dealerships all over the country. Global Automakers lists state-by-state data on the multibillion dollar economic impacts of its members

To highlight a few; Honda builds in Alabama, Georgia, Indiana and Ohio; Toyota builds in Alabama, California, Indiana, Kentucky, Mississippi, Tennessee and Texas; Volkswagen builds in Tennessee; Hyundai builds in Alabama and Georgia; Kia builds in Georgia; BMW builds in South Carolina; Mercedes-Benz builds in Alabama, Indiana and South Carolina; Nissan builds in Mississippi and Tennessee; Subaru builds in Indiana.

Meanwhile, negotiations over NAFTA have dragged on with the president promising to renegotiate its terms or withdraw from it entirely. Congress has taken no action.

Trump has indicated he may withdraw from the agreement that he — and many blue-collar voters and their labor leaders — have argued drive jobs out of America to Mexico and elsewhere. Yet automakers have been supportive of NAFTA, with partnerships and investments formed over the past two decades. 

On Wednesday, Trump railed about NAFTA talks.

"NAFTA is very difficult," he said as he boarded Marine One. "Mexico is very difficult to deal with. Canada has been very difficult to deal with it. They have been taking advantage of the United States for a long time.

"I am not happy with their requests," he continued. "But I will tell you, in the end, we win. We will win, and we'll win big. We'll get along with Mexico; we'll get along with Canada. But I will tell you, they have been very difficult to deal with. They're very spoiled — because nobody has done this. But I will tell you that what they ask for is not fair."

Replay Video
>>>>>UP NEXT1Cancel
SETTINGSOFF
HDHQSDLO
Best of Late Night on Trump's relationship with China>USA TODAY See more videos
SHARESHARETWEETSHAREEMAIL
What to watch next
UP NEXT UP NEXT

Trump is exploring tariffs of as much as 25% on auto imports, the Wall Street Journal said.

"It seems designed to pressure Canada and Mexico to accept the U.S. proposal at the NAFTA table," Dziczek said. "Could be, but there are plenty of UAW jobs tied to making engines, transmissions and other parts for vehicles imported from Canada and Mexico."

For example, southeast Michigan is closely tied to Ontario in auto production, with more than $70 billion of vehicles, parts and other items traveling between the two each year.

The U.S. Commerce Department statement said: "The investigation will determine whether imports of automobiles, including SUVs, vans and light trucks, and automotive parts into the United States threaten to impair the national security ... Secretary [Wilbur] Ross sent a letter to Secretary of Defense James Mattis informing him of the investigation.

“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Ross said in the release. “The Department of Commerce will conduct a thorough, fair and transparent investigation into whether such imports are weakening our internal economy and may impair the national security.” 

The statement then goes on to say, "From 1990 to 2017, employment in motor vehicle production declined by 22%, even though Americans are continuing to purchase automobiles at record levels ... This investigation will consider whether the decline of domestic automobile and automotive parts production threatens to weaken the internal economy of the United States, including by potentially reducing research, development, and jobs for skilled workers in connected vehicle systems, autonomous vehicles, fuel cells, electric motors and storage, advanced manufacturing processes, and other cutting-edge technologies."

A notice will be published in the Federal Register announcing a hearing date and inviting comment from industry and the public to assist in the investigation, Ross said. 

Washington bureau reporter Todd Spangler contributed to this story.

Contact Phoebe Wall Howard: 313-222-6512 or phoward@freepress.com. Follow her on Twitter @phoebesaid.

Source : https://www.msn.com/en-us/finance/companies/analysts-trump-doesnt-get-the-auto-industry-tariffs-hurt-consumers/ar-AAxKIff

Thanks for visit my website
Analysts: Trump doesn't get the auto industry; tariffs hurt consumers
Tariffs Aren't Saving Steel Towns
Grading the first season of ABC's 'American Idol' reboot
The Auto Industry Is Gearing Up for a Blockchain-Powered Future
U.S. auto import probe fans tariff fears, riles Asia, Europe carmakers
US launches auto import probe, China says will defend its interests
Why is Wells Fargo afraid of this nun?
American automakers scrap cars, ceding market to foreign makes
China to Cut Auto Import Tariffs