Trump's auto tariff threat
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"President Trump likes to keep allies and adversaries guessing," said Ana Swanson and Jim Tankersley at The New York Times. But his threat last week to slap tariffs of up to 25 percent on imported cars, trucks, and auto parts was "met by surprise at home and abroad, and prompted warnings that it could destabilize global supply chains." Trump ordered the Commerce Department to investigate whether foreign car sales imperil national security, on the theory that they have degraded American manufacturing capabilities — the same justification he gave for his steel and aluminum tariffs. Critics of the move were quick to point out that even American-made cars contain dozens of foreign parts; it's been estimated that a 25 percent tariff could raise the price of a small passenger car by between $5,000 to $6,000 and cost American consumers around $48 billion annually. About 8.7 million vehicles purchased in the U.S. last year, or 44 percent, were imported, said Phoebe Wall Howard at the Detroit Free Press. But 98 percent of them came from Mexico, Canada, Japan, South Korea, and the European Union, some of our biggest military allies. That's one reason why many auto analysts say the national security justification is specious, and that Trump's threat "reflects a lack of understanding of the intricacy of the auto supply chain."
Trump's "brutalistic thinking" on trade is that it's a zero-sum game, said the Los Angeles Times in an editorial. He believes that "more products made in foreign factories means fewer made here, with fewer jobs for Americans." But the reality of the auto industry is "far more complex." For years, even as U.S. carmakers have moved plants overseas to save on labor costs, foreign automakers have set up dozens of plants here, to push production closer to where many of their cars are sold. Seventy percent of Toyotas and 94 percent of Nissans sold in the U.S. are made here; Toyota alone employs 136,000 Americans. U.S. automakers wouldn't be immune, either: General Motors, Ford, and Fiat Chrysler imported nearly 2 million vehicles for sale in the U.S. last year, and those vehicles would also be slapped with the tariffs, with the costs likely being passed on to U.S. consumers. "Trump seems to think that threatening these auto tariffs might give him leverage over Mexico and Canada in NAFTA negotiations," which have largely stalled over auto rules, said Catherine Rampell at The Washington Post. Mexico and Canada are the biggest suppliers of U.S. car imports, worth a combined $89 billion annually. They might be willing to cut a deal now in order to take a 25 percent auto tariff off the table. But given the president's whiplash trade decisions, "if you're Mexico or Canada, would you trust Trump to keep his word?"
Let's not get too worked up about this, said Jonathan Swan at Axios. Auto tariffs are "not imminent." Commerce Secretary Wilbur Ross now has 270 days to conduct a thorough investigation, and then Trump himself has another 90 days to consider the recommendations. Who knows what will happen by then? As consequential as the tariffs would be for the global economy, right now "they're far from a lock."