Half the trouble with tariffs is they are so tempting to the populist crowd. The other half is the math never works out.
But here we go again. The Commerce Department has now delivered a report to the White House that auto industry officials worry President Trump will use as a pretext to slap up to 25 percent tariffs on imported cars and car parts. The reason he might cite will be national security.
If this sounds familiar, it should. It mirrors the administration’s justification last year for tariffs on steel and aluminum. Trump’s mantra is that auto tariffs would shield the U.S. economy from foreign competitors, saving jobs and enhancing national security.
Statistics show the opposite. Trade wars kill jobs and drive up costs to consumers, the engine behind U.S. economic growth. The auto industry is a massive contributor to the U. S. economy. A tariff war should be the last thing the president should be considering.
The U.S. auto industry can’t be walled off without throttling growth. The is made up of domestic companies, foreign manufacturers with U.S. plants and supply chains that span national borders. Foreign parts comprise more than 40 percent of the average cars produced in the U.S. This diverse supply chain increases efficiency and lowers production costs. And the ability of auto makers to tamp down such costs makes the companies more profitable and cars more affordable.
This is why the president’s belief that trade wars are easy to win is so misguided. Tariffs prompt companies to lay off workers, move development and production offshore and pass their significantly higher costs to consumers. And this isn’t economic theory; it’s economic reality.
According to the National Automobile Dealers Association, tariffs would add as much as $2,270 to the cost of U.S.-built cars and $6,875 to the cost of imported cars and trucks. The Center for Automotive Research estimates 1.3 million fewer cars will be sold in the U.S. due to higher retail prices.
Another overlooked area is the impact of tariffs on foreign investment in the U.S. BMW’s plant in South Carolina employs more workers than its plant in Bavaria. This is an investment tariffs might force the company to reconsider. Toyota’s growing stake in Texas is another example of the benefits of free trade. The ability to move product seamlessly across North America is a major reason behind Toyota’s headquarters and production investments in Texas. Such relationships strengthen our economy and provide American workers with paychecks that support local economies.
The auto industry generates billions of dollars for the U.S. economy and employs tens of thousands of skilled workers. At least 45 states have more than 10,000 auto-related jobs. A 25 percent tariff on imported motor vehicles and parts — and the inevitable retaliation — could put at risk at least one million jobs between now and 2021, warns the Trade Partnership Worldwide, an international trade and economic consulting firm.
Our message to Trump’s tariff “help.” No thanks.
— Dallas Morning News