President Trump’s threat to impose national security tariffs on vehicle imports risks disrupting the supply chains of more than a fourth of the U.S. automotive industry, costing American workers high-paying jobs and further fraying longstanding alliances, Europe warned the White House on Monday.
Trade-restrictive measures would make U.S. carmakers less competitive, “weaken the U.S. economy and reduce its innovation potential,” a delegation from the European Union trading bloc wrote in comments submitted for an investigation the Commerce Department is required to conduct before imposing duties under Section 232 of the Trade Expansion Act of 1962.
The proposed 25 percent levies, which follow tariffs on steel and aluminum as well as duties on $34 billion in Chinese imports, have sparked a global backlash against American industries. Economists, corporate executives and some lawmakers from Trump’s own party have warned that his policies risk igniting a global trade war that undermines the benefits of last year’s tax cuts and potentially pushes the world into a recession.
While Trump has largely shrugged off such concerns, maintaining that people “who happen to be smart” appreciate his strategy, major U.S. stock indexes have tumbled from record highs since he began pursuing the protectionist measures. The blue-chip Dow Jones Industrial Average remains 7 percent below its January record of 26,616.
“Restricting imports of cars, light trucks and car parts under Section 232 would be counterproductive, as protective measures would undermine U.S. growth, negatively impact job creation, and not improve the trade balance,” the European Union said. “Automobiles and automotive parts imported from the EU and other parts of the world do not threaten U.S. producers’ ability to satisfy national security needs, or even the long-term viability of the sector serving civilian customers.”
European automakers build almost 2.9 million cars in the U.S. today, accounting for 26 percent of production, EU leaders wrote. Even excluding European ownership of Chrysler, one of the Big 3 U.S. automakers, companies including BMW, Mercedes, and Volkswagen comprise 16 percent of output. They directly employ 120,000 workers in states such as South Carolina, Alabama, Mississippi and Tennessee, all of which supported Trump in the 2016 presidential election.
Additionally, European carmakers in the U.S. export a large portion of their output, which improves American trade balances with the rest of the world, one of Trump’s priorities, the EU noted.
As with the tariffs of 25 percent on steel and 10 percent on aluminum, auto duties are likely to prompt retaliation by trading partners, Europe warned. That would cover about six times the volume of trade affected by the metals levies.
In addition to pointing out the financial impact of the tariffs, Europe sharply criticized the “proliferation of measures taken on supposed national security grounds for the purposes of economic protection.”
The tactic “harms trade, growth and jobs in the U.S. and abroad, weakens the bonds with friends and allies, and shifts the attention away from the shared strategic challenges that genuinely threaten the market-based Western economic model,” the bloc wrote.
Both Mexico and Canada have also opposed the automotive tariffs, which would disrupt the flow of parts and vehicles across North American borders that has become a crucial part of the region’s car production. Manufacturers from BMW to General Motors have warned of likely consequences, including new overseas barriers to U.S. exports and job losses.
Still, “Trump has made it clear he believes these new tariffs will be a political winner” in November mid-term elections, said Chris Krueger, an analyst with Cowen Washington Research Group.
Democrats are fighting to wrest control of the House of Representatives from Republicans in those races. Observers from both parties have speculated that a Democratic victory might spur an immediate push to impeach Trump, who has repeatedly touted economic growth to counter the shadow of a special counsel’s investigation into whether his 2016 campaign colluded with Russia.
Adding tariffs to auto imports would benefit the economy, the president has claimed, and thus motivate Republican voters this fall.
He “has made that belief clear to the Commerce Department, who by all accounts are rushing this decision out the door,” Krueger said.
