For all of his talk about trade deals, President Trump doesn’t actually seem to want one when it comes to cars. In a pre-taped interview that aired on Fox Business Friday morning, the president said he had rejected a deal for zero car tariffs with the European Union and instead favored tariffs to force European automakers to manufacture cars in the U.S.
I know Trump is a protectionist at heart, but even he should recognize that zero tariffs would be a great deal for the U.S.
Such an agreement would make cars more profitable to sell in the EU (eliminating the current 10 percent tariff imposed by Brussels), make European cars cheaper for Americans to buy (now subject to a 2.5 percent tariff), and quell the current uncertainty swirling in the auto industry.
Nevertheless, when asked if he would support a deal for zero car tariffs between the U.S. and the EU, he responded: “No, because a Chevrolet will never sell [in Europe] like a Mercedes sells here. They’ve offered me that.”
In the same interview, Trump was also quite clear about what he did want, explaining: “I’ll tell you what the endgame is. They’ll build their plants in the United States, and they have no tariffs.”
But those tariffs that Trump seems to think would help out Americans would do just the opposite. Imposing 25 percent tariffs on car imports, as Trump is considering, would tack on as much as $4,400 to the average price of a new car. Moreover, since only Tesla currently makes all of its vehicles in the U.S., lower tariffs will benefit auto manufacturers across the board.
Even if tariffs did push some companies to open new plants in the U.S., there would ultimately be fewer jobs, higher-priced cars, and perhaps even fewer options for consumers if some manufacturers were to decide that exporting to the U.S. was too costly.
If Trump really cares about helping U.S. automakers or keeping auto jobs in the U.S., he holds the keys to giving the industry an easy boost: Drop the steel and aluminum tariffs. For automakers, the increased prices of raw materials have eaten into profits, raised prices for consumers, and led to market headaches. Those tariffs are likely part of the reason behind GM’s layoffs and the plant closure that Trump was so upset about last weekend.
