Auto Truce is Over: Trump Again Threatens the EU, Japan with a 25% Tariff

Trump again threatens the EU with 25% tariffs on cars just as he is working on a deal with China. What's the obsession?

Trump meets with his trade team today to discuss a Draft of Car Import Tariffs.

Trump claims that auto imports are a threat to US national security under section 232 of the 1962 Trade Expansion Act.

It's the same provision Trump used to justify steel and aluminum tariffs earlier this year.

Yes, it's totally stupid.

Truce Won't Last Much Longer

European Commission President Jean-Claude Juncker says U.S. Car-Tariffs Truce May Not Last Long.

“We had achieved that there will not be a new trade conflict over the summer months until the end of the year, particularly with regard to car tariffs,” Juncker said in a speech in Berlin on Monday.

Auto tariffs at that level would add about 10,000 euros ($11,300) to the sticker price of the average European-built car sold in the U.S., according a European Commission assessment obtained by Bloomberg last summer. That would cut U.S. imports of European cars and car parts in half, the commission forecast.

Auto Companies Blast Tariffs

Please consider How Car Companies Are Blasting Trump's Import Investigation.

  • GM: Says tariffs “could lead to a smaller GM” and risks resulting in “less -- not more -- U.S. jobs” by increasing costs and spurring retaliation by countries that could hurt the company in other markets
  • Ford, Fiat Chrysler: On behalf of members GM, Ford and Fiat Chrysler, the American Automotive Policy Council estimates a 25 percent levy would be an $83 billion tax burden for the U.S. auto industry and consumers.
  • Toyota: The company has 10 manufacturing plants and an eleventh being constructed soon with Mazda Motor Corp. that directly or indirectly employs 137,000 people. It's invested almost $25 billion in the U.S. to design, engineering, manufacture and sell Toyota and Mazda vehicles. A 25 percent tariff on imported vehicles and parts would raise the price even of the Kentucky-built Camry sedan -- the top-selling car in America -- by about $1,800
  • Nissan: Has invested $11.8 billion in U.S. manufacturing, employs 22,000 directly and boasts the country’s biggest vehicle production facility, in Tennessee.
  • BMW: Has invested almost $9 billion in its South Carolina plant and is also the only manufacturer that produces more cars than it sells in the U.S.
  • Volkswagen: Employs about 3,500 at plant in Tennessee and directly supports almost 50,000 U.S. jobs.
  • Mazda: If a 25 percent tariff is imposed on imported vehicles, the company may change plans to invest in its dealer network and in a new plant it’s building with Toyota in Alabama.
  • Daimler: Employs more than 24,000 in the U.S. across operations including its Mercedes-Benz passenger vehicle and van businesses, financial services unit and research-and-development operation. “New tariffs on imported parts will result in a reduction of vehicles being produced in Alabama. Lower production volumes will result in fewer shifts with fewer U.S. employees”
  • Volkswagen: Employs about 3,500 at plant in Tennessee and directly supports almost 50,000 U.S. jobs.

Job Losses

It is crystal clear there will be tens of thousands of job losses if Trump goes through with his idiotic plan.

There will not be comparable gains for US companies. Even GM and Ford are against the tariffs.

If you think this is a good tactic related to the "Art of the Deal" you are truly mistaken. Trump is clueless on trade.

Mike "Mish" Shedlock

Comments (14)
No. 1-8
Sechel
Sechel

How can we conduct economic policy when the chief negotiator is capricious and unstable? Companies cannot plan around this degree of uncertainty

Realist
Realist

As I always say; the US economy should continue to grow slowly; unless something odd happens like Trump expanding his Tariff wars.

Kinuachdrach
Kinuachdrach

The US runs a huge imbalance in auto trade -- which standard economic theory says should be one of the high-tech products that an advanced economy sells to other countries. It is obvious to a blind dog on a dark night that the tariffs are intended to get other countries to negotiate their way to fair trade. That is tough when previous administrations have unilaterally surrendered and given other countries an advantaged position. The trade war started a long time ago; finally, in President Trump, the US has someone who will fight back.

So there will be a lot of noise, some pain, and at the end the world will be a better place.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

"How can we conduct economic policy when the chief negotiator is capricious and unstable?"

Excellent point

Top-GUN
Top-GUN

Public/Private partnerships,,, government choosing winners and losers...