A new study says the American automobile industry will lose 195,000 jobs over the next three years if President Donald Trump presses forward with a plan to impose 25 percent tariffs on imported cars and auto parts. That's on top of the existing tariffs on steel and aluminum, which are already forecast to whack automakers and other manufacturing jobs.
According to the study, which was released by the D.C.-based Peterson Institute for International Economics (PIIE), a 25 percent tariff on automobiles and auto parts would cause production in those industries to fall by about 1.5 percent and would force the industry to shed around 1.9 percent of its American workforce. The resulting slowdown would affect more than $200 billion in U.S. exports, PIIE projects.
Last week, Trump ordered Commerce Secretary Wilbur Ross to investigate whether the U.S. should slap new tariffs on imported vehicles and auto parts under Section 232 of the Trade Expansion Act of 1962, which allows the president to impose tariffs unilaterally for "national security" reasons. It's the same process the White House used to craft the tariffs on steel and aluminum imports that Trump announced in early March.
It's absurd, of course, to argue that imported cars are a threat to national security.
The auto tariffs "would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war," Thomas J. Donohue, president of the U.S. Chamber of Commerce, said in a statement.
The American automobile industry employs 50 percent more people than it did in 2011, Donohue noted, and domestic production has doubled in the last decade. According to PIIE, the United States imported $183.8 billion of passenger cars, SUVs, and minivans in 2017, mostly from the European Union ($46.6 billion), Canada ($43.3 billion), and Japan ($43 billion). The U.S. currently imposes a 2.5 percent tariff on cars and a 25 percent tariff on trucks—a hangover from a 1960s trade war with France and Germany.
If other countries respond to American tariffs on automobiles and auto parts with similar tariffs, PIIE projects, the consequences could be even more disasterous. In that scenario, American production would fall 4 percent and 624,000 American jobs would be lost.
"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," PIIE's analysts write. "Consumers could expect to see prices rise for both imported and domestically produced vehicles."