President Trump has already used national security to justify damaging steel and aluminum tariffs. Now he’s considering doing the same thing with cars and car parts. No thank you, Mr. President.
Tariffs as high as 25 percent on cars and car parts, however, might be just around the corner. A report from the Department of Commerce on its determination of the national security implications of imported cars and car parts is due to the White House by Feb. 17.
That report would be the first step to Trump deciding to impose new tariffs under Section 232 of the Trade Expansion Act of 1962. That section offers the president a loophole to impose tariffs without going through Congress if the Department of Congress recommends that certain goods are vital to the country’s national security interest and therefore needing trade protection to encourage domestic production.
Now if that sounds absurd (are imported Toyotas, Hondas, or even Porsches really hurting our ability to protect ourselves?), it’s not out of the running that Trump’s Commerce Department would decide that they were. After all, the same department earlier recommended that the country would be justified in imposing steep tariffs on steel and aluminum.
To understand why Trump would be interested in imposing new taxes, and tariffs are definitely taxes, it’s critical to look at Trump’s 2020 political ambitions.
Like with the steel tariffs, his aim with the new levies is less about keeping the country safe than symbolically bringing back manufacturing. Trump wants to safeguard jobs for what he, perhaps correctly, views as the core of his base while also making good on campaign promises to voters.
Politically, he’s likely not wrong. Keeping auto jobs in Michigan would be a major selling point to voters in a state that played a significant role in sending him to the White House.
But trade policy must not be about drumming up particular patches of political support. Instead, the president should focus on what is broadly good for the country. With cars, that means not imposing taxes that will likely boost the average price of a car in the U.S. by more than $1,000 and potentially as much as $4,400. Those costs take a real toll on domestic business with car retailers alone potentially losing as much as $66.5 billion in revenue.
Even worse, the potential tariffs on cars are unlikely to have the desired effect. For one thing, even domestic producers rely on materials imported from overseas or even have factories located elsewhere. Tariffs aren’t going to help American manufacturers who depend on trade for profits. Moreover, as happened with the Section 232 tariffs, other countries are likely to respond with retaliatory tariffs of their own which will have an unpredictable but destabilizing impact on the U.S. economy.
Tariffs, except in specific and narrow scenarios, are generally bad economic policy. They cut free trade, give governments the ability to pick winners and losers through obscure exemption decisions, and end up costing consumers and business alike.
Typically, Republicans have understood this and been a pretty pro-free trade bunch, leaving protectionist tariffs and raising taxes to Democrats.
Some Republicans still seem to remember their principles. Indeed, Sen. Chuck Grassley, R-Iowa, made clear that he, for one, objected to new tariffs on cars, explaining, “Raising tariffs on cars and parts would be a huge tax on consumers who buy or service their cars, whether they are imported or domestically produced.”
But to stop such abuse of presidential authority, lawmakers need to push back with more than words. Those truly interested in doing that should support legislation introduced by Sens. Pat Toomey, R-Pa., and Mark Warner, D-Va., that would prevent the president from imposing tariffs, including those on cars, without congressional approval.
Standing by while the president drives away with free trade principles that underpin a strong economy is not in the interest of the country which benefits far more from strong growth than costly tariffs in the guise of national security.
