The Department of Commerce initiated a national security investigation on auto and parts products on May 23. Findings and recommendations are due by mid-February 2019 but could be issued much sooner.
President Trump is reportedly considering raising US duties to 25 percent on all imports of automobiles—including SUVs, vans, and trucks—and auto parts, invoking the same national security law recently used to impose tariffs on steel and aluminum. A new PIIE analysis shows that if he did this, production in these industries would fall 1.5 percent and cause 195,000 US workers to lose their jobs over a 1- to 3-year period or possibly longer. The US auto and parts industries would shed 1.9 percent of their labor force. The analysis assumes there would be no exemptions for any country (or even for North American Free Trade Agreement [NAFTA] partners, as in the steel and aluminum cases). The potential trade action would affect more than $200 billion in US imports.
If other countries retaliate in-kind with tariffs on the same products, production would fall 4 percent, 624,000 US jobs would be lost, and 5 percent of the workforce in the auto and parts industries would be displaced (table 1). This second scenario would also hurt US exports of these products more than imports. The aggregate effects on the US economy in either scenario would be small.
Both scenarios demonstrate how reliant the domestic industries are on imported parts, or intermediate inputs, that are not produced in the United States or that have no easy US-made substitute. Tariffs would raise the cost of these parts and domestic production, which makes products more expensive to consumers and lowers demand for them in the United States and abroad. Consumers could expect to see prices rise for both imported and domestically produced vehicles.
US Auto Exports
US auto exports total $51.1 billion.
Truck exports are another $15.1 billion, nearly all of it to Canada.
Tweet to Think About
How Stupid is This?
The knock-on impacts, which the PIIE did not estimate, are likely to be as important, if not more important
Instead, let's portray it as "Winning".
Why Do This?
As a matter of national security, we allegedly need to harm the US auto sector.
Mike "Mish" Shedlock