President Trump made a great show Friday of declaring that imported automobiles are a threat to national security, buttressing his argument in favor of tariffs on global auto imports. Happily, he put off deciding whether to pull that trigger for at least six months.
The escalating trade war with China is already threatening to hit an increasing percentage of U.S. consumers with higher costs, as higher tariffs are applied to a growing number of goods. But a hefty tariff on cars would raise the ante on the consumer pain (and political blowback): More than 15,000 people across the country buy imported vehicles each day — about a third of the roughly 17 million cars and light trucks sold each year are assembled in foreign factories, according to research by Frank DuBois of American University. And even domestic manufacturers import at least a third of their components, DuBois found.
Trump has been public for some time about his desire to impose auto tariffs as a way to gain leverage in trade negotiations with the European Union (and Germany in particular). The gears started turning last year when he ordered a study by his tariff-happy Commerce Department on the damage imports were causing domestic car makers. But after the department submitted its report privately in February, Trump sat on it for three months, raising hope that he was listening to the howls of protest from industry, the business community and Congress.
That’s right — U.S. automakers decided they are not asking for Trump for this “help.” That’s because they have global supply chains and global markets, so they would be hurt not just by U.S. tariffs, but by the inevitable retaliations from our trading partners.
Trump’s proclamation confirmed that auto tariffs remain just a threat at the moment. According to the White House, Trump instructed U.S. trade negotiators to seek a deal with Japan, the European Union and other auto exporters, and “if agreements are not reached within 180 days, the president will determine whether and what further action needs to be taken.”
But as we’ve seen in Trump’s trade fight with China, this is the sort of threat the president actually carries out. Considering how difficult the negotiations are likely to be, especially with the European Union, it feels like the countdown to tariffs on cars and vehicle parts just started. (Imported light trucks and SUVs have been subject to a 25% tariff since the 1960s.)
Perhaps the most galling thing about the latest threat is the justification cited by the White House. Trump is trying to exploit a World Trade Organization rule that gives countries latitude to impose tariffs unilaterally when they believe their national security is at stake. But the argument the White House offered Friday was even more specious than the one used to justify slapping 10% to 25% tariffs on steel and aluminum imported from longtime U.S. allies. (Trump also announced Friday that he would finally exempt free-trade partners Canada and Mexico from the metals tariffs — a move done to win support from U.S. and Canadian lawmakers for the president’s proposed update to the North American Free Trade Agreement.)
According to the administration, carmakers’ research and development on engines, powertrains, materials and autonomous control are important to the U.S. defense industry. That R&D is threatened by competition from foreign automakers, the administration argues, and the (unfathomably large) U.S. military budget isn’t sufficient to take the place of private investment. Hence the need to preserve U.S. automakers’ share of the domestic market for cars.
In other words, to preserve innovation by U.S. companies, the government needs to protect them from the competition that drives innovation (as well as improvements in efficiency and quality). But the protection would only be from the competition that’s coming from factories overseas. If Trump imposed car tariffs, they wouldn’t apply to automobiles made by Honda, BMW or any other foreign manufacturer in their U.S. plants.
Forget logic — are there no capitalists in this White House?
Beyond that, the market for cars is global. While Ford and General Motors obviously want to sell lots of cars in the United States, that’s not their only focus. And one can only imagine what might happen to their sales around the world when other markets retaliate with tariffs on U.S. cars.
And do we really think the United States is so much of an island unto itself when it comes to national security that it’s paramount to have U.S.-owned companies making every crucial technology? Granted, Trump’s version of “America First” has come to look like “America Alone.” But it’s not a realistic view of the world or of U.S. security interests.
If lawmakers had the courage of their convictions, they would take back some of their constitutional authority over tariffs from the White House. There are two bipartisan bills in the Senate to do that, but neither has advanced. Trump’s countdown for a deal on automobile imports has given legislators a deadline that should stiffen their spines.