U.S. Secretary of Commerce Wilbur Ross on Sunday submitted the findings of a probe on whether imported vehicles and auto parts pose a national security threat, which could lead to a new round of tariffs. Trump now has 90 days to decide whether to act on the recommendations.
The investigation started last May under Section 232 of the Trade Expansion Act, the same provision the administration used to slap tariffs on steel and aluminum.
According to a new study (PDF) by the Michigan-based think-tank Center for Automotive Research (CAR), South Korea, Canada and Mexico are likely to be exempted from the tariffs, but even then, the cost of American-made cars would rise by US$1,900.
“We make things together, parts cross our borders multiple times using U.S. components and U.S. parts,” said Kristin Dziczek, CAR vice-president. “If those U.S. parts and components have imported content in them, then you will be hit by increased costs as well.”
Light-duty vehicle prices would climb by an average US$2,750 while imported cars would be hit hardest, with a price hike of about US$3,700, according to the paper titled “U.S. Consumer & Economic Impacts of U.S. Automotive Trade Policies” (PDF).
The combined impact of the trade measures would cause U.S. car sales to fall and 366,900 American jobs to be lost, with most of them — about 90%— caused by the auto tariffs.
“If we think the tariffs on steel and aluminum were bad, this would be way bigger,” said Dziczek.
Canada and Mexico both have “side letters” with the U.S., negotiated alongside the revamped North American Free Trade Agreement, that provide certain exemptions from any potential auto tariffs.
Canada’s exemption covers 2.6 million vehicle imports and US$32.4-billion worth of auto parts, while Mexico’s covers 2.4 million units and US$90-billion worth of supplies, well above current export levels for both countries.