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Free Minds & Free Markets

Trump’s Tariffs May Classify Imported Cars as National Security Risks

American cars with foreign parts will suffer too.

If you drive an imported car, as I do, your vehicle may soon be declared a national security risk by the Department of Commerce. If you drive an American-assembled car, your car may also pose a threat to U.S. national security because it inevitably contains some foreign parts—which Commerce could include in its list of threats to national security. If President Donald Trump acts on this finding, it'll be bad news for automakers and even worse news for consumers.

Section 232 of the Trade Expansion Act of 1962 gives the president unilateral authority to impose tariffs or quotas on imports that "threaten to impair" U.S. national security. In a still-undisclosed-to-the-public report sent to the administration on Sunday, many suspect that Commerce contends imported foreign cars and parts represent just such a threat. If that's the case, it would give the president power to impose restrictions on them, such as a 25 percent tariff. He has up to 90 days to announce his decision and another 180 days to negotiate remedies with trade partners.

If Trump imposes these trade restrictions, it will make producing and purchasing every single new automobile in America more expensive. Yes, I mean all automobiles, not just imports. That's because, while car brands can be national (e.g., Toyota is Japanese, Mini is German, Ford is American), in reality they are global automakers using global sources for their parts.

Many "foreign" automakers produce and assemble cars in the United States and then export them to the rest of the world. The same is true for "American" automakers who have both domestic and international locations from which they produce for export and domestic consumption. No automobile is made with 100 percent of its parts from one county. For instance, Tesla—which is unique in that it produces all of its vehicles in the United States—imports half of the parts it uses.

Looking at the percentage of each vehicle's parts and manufacturing that comes from either the United States or Canada as tracked by U.S. regulators, CNN Money reported that "the two most 'American' cars are both Hondas—the Odyssey minivan and Ridgeline pickup. Three-quarters of each vehicle's components are made in the United States or Canada."

In other words, no automakers—not even G.M. or Ford—will be safe from these tariffs. All manufacturers will suffer rising costs, much of which will be shifted onto consumers via higher prices.

A new study from the Center for Automotive Research estimates that import restrictions would increase new-car prices by $455 to $6,875, depending on the approach the administration takes. These higher prices would reduce annual consumer demand by 493,600 to 2 million vehicles. But that's before other countries retaliate with their own tariffs and quotas.

These new U.S. trade barriers will impact more than sticker prices. If the American market is too small for a foreign automaker to justify building a U.S. factory for a given model, all the models of that car sold here will be imported. Those tariffs could make the cost of importing that particular model so uncompetitive that the company simply stops selling it here, meaning fewer choices for American consumers.

U.S. exports could also fall. Foreign and domestic companies produce cars for U.S. consumption, but they also export a massive amount. Motor vehicles and auto parts are respectively the third- and fourth-highest U.S. exports. If new tariffs are implemented, the high cost of importing will make the domestic production of auto exports for foreign markets more expensive and uncompetitive. Manufacturers will then have a big incentive to shift production abroad, and that will only intensify when foreign retaliation kicks in.

We saw this play out last year after the administration used Section 232 to impose a 25 percent tariff on steel imports. Many countries retaliated with their own tariffs and quotas, and a few months later, Harley Davison announced that it would move some of its production to Thailand. BMW also announced that it would move some of its U.S. SUV production abroad.

We all better hope Trump doesn't go ahead with these tariffs.

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  • a ab abc abcd abcde abcdef ahf||

    Make America Gallop Again

  • Leo Kovalensky II||

    (If you drive a car, car)
    I'll tax the street
    (If you try to sit, sit)
    I'll tax your seat
    (If you get too cold, cold)
    I'll tax the heat
    (If you take a walk, walk)
    I'll tax your feet
    Tariffman!

    Cause I'm the tariffman
    Yeah, I'm the tariffman (yeah, I'm the tariffman)

  • Ordinary Person||

    He hurts us because he loves us.

  • Old Mexican - Mostly Harmless||

    He said he likes tariffs, just a couple of days ago. He said he's a free market guy, during the Gee Whiz Seven submit-to-me, which means he lied. He lies.

    "Father Karras, the Devil is a liar. Don't listen to him."

  • Last of the Shitlords||

    Hey old faggot. I see you're not dead yet.

    That's a shame.

  • Don't look at me!||

    Or, he might not.
    (I'm not a good headline writer)

  • John||

    We could ban the imports of cars and the foreign automakers would respond by just building plants in the US. This is what they did in response to Reagan's tariffs. This is why there are Toyota plants in Texas and BMW plants in South Carolina. Long term the only cost to the economy is the difference in cost of producing a car there versus producing one in Japan, South Korea, or Germany.

    Tariffs are taxes. And like all taxes, markets adjust. Reason seems to understand that in the context of income taxes but then somehow forgets it when it comes to tarriffs.

  • BearOdinson||

    I don't think anyone is arguing the market wouldn't adjust, but the supply-demand equilibrium point would result in higher prices overall. Just like when governments impose taxes on certain goods, that usually results in higher prices as the sellers pass the cost on to the consumer.

  • BearOdinson||

    BTW: That isn't intended to be an argument for or against tariffs. In general, I don't think tariffs are a good idea. But I do understand the motivation behind using tariffs as a tool in trying to get other countries (a number of whom don't even come close to free markets) to lower their trade barriers.

  • loveconstitution1789||

    +100

  • Last of the Shitlords||

    I think that's a good way of looking at it.

  • a ab abc abcd abcde abcdef ahf||

    His entire goal is mistaken. Imports have to equal exports -- dollars out have to equal dollars in. And he thinks exports are the goal while imports are evil -- that's backwards. Exports are how to earn the money to buy imports.

    Trump understands nothing about trade or markets.

  • Fist of Etiquette||

    Uh, I guess Ms. de Rugy forgot about when all those Toyota accelerators got stuck.

  • loveconstitution1789||

    Hello...exploding gas tanks!

  • Flinch||

    Did Ford copyright that? The Chinese will know - they seem to have setup an office inside the patent office during Bill's presidency.

  • markuzick||

    They didn't: that was Obama's way of deflecting criticism of his GM bailout.

  • loveconstitution1789||

    If you drive an American-assembled car, your car may also pose a threat to U.S. national security because...

    So speculation to attack any Trump effort to get lower trade restrictions via hardball trade negotiations.

    Got it.

  • loveconstitution1789||

    Technically Chinese cell phone manufacturers are using their products to spy on Americans.

    Americans are using iPhones to spy on everyone in the World.

    This stuff might actually pose a threat to national security but I think the free market will decide. Do I want Commies spying on me or the NSA spying on me?

  • Wise Old Fool||

    Why can't it be both???

  • OldGuy||

    "...Do I want Commies spying on me or the NSA spying on me?..."

    Truth sometimes makes me laugh. In this case I was sipping coffee. Now I have to clean the laptop that is spying on me.

  • Last of the Shitlords||

    I pity the poor bastard that monitors my conversations. I had to have several repetitive conversations defusing a non existent problem a sibling was creating regarding an open and shut fire investigation on one of our parents' rental properties.

    Mind numbing stupidity that murdered two hours of my life just like an argument with Tony or Little Jeffy.

  • M.L.||

    Angela Merkel offered this disingenuous take in a recent talk in German. Now, here it is being parroted by Reason.

    No, the Trump administration is not saying that imported cars themselves are a national security threat. The Trump administration is saying that unilaterally destroying our own steel and manufacturing industries through lop-sided trade policies is a national security threat.

  • NoVaNick||

    Progs should love this-cars are a leading cause of climate change after all, so there will be fewer cars on the road because of this, oh and fewer people coming in because of the wall will slow population growth, another cause of climate change. Trump: doing the progs' dirty work, so they don't have to!

  • BearOdinson||

    I just went back and re-read the article. The authority to do this was passed in Congress back in 1962, so it is hardly "TRUMPF!"

    In a still-undisclosed-to-the-public report sent to the administration on Sunday, many suspect that Commerce contends imported foreign cars and parts represent just such a threat. If that's the case, it would give the president power to impose restrictions on them, such as a 25 percent tariff. He has up to 90 days to announce his decision and another 180 days to negotiate remedies with trade partners.

    Still undisclosed, many suspect, if that's the case, would give the president power, 90 days to decide, and still could negotiate remedies with trade partners.

    There isn't a single fact of any certainty in that paragraph. MAYBE, IF, MAYBE, MIGHT, MAYBE.

  • a ab abc abcd abcde abcdef ahf||

    You've set a new record for how far Trumpistas will go.

    Trump is changing the tariifs, not the 1962 Congress. Why don't you stretch the blame further back to the framers who write the Constitution in 1787? Or the Revolutionary war and the Declaration of independence? Heck, Magna Carta was 1215 or thereabouts.

    What a fucking lame excuse.

  • BearOdinson||

    First of all, I am not arguing that it is a good idea. In general, I am against tariffs and such. I was trying to point out:
    1) The act was passed in 1962 that gave the president unilateral power to do this. I am not saying he should. I am saying Congress gave the office of the president that power.
    2) There was nothing in this article to demonstrate what the actual report says, nor what Trump will do. We don't know anything at this point and all this speculation is just premature.

  • loveconstitution1789||

    +10 BearOdinson

  • Wise Old Fool||

    It's like the bullshit in the bible. 99% of the time you can find something to support what you're saying. The point is that he's trying to force the law into usage which is 100% Drumpf's fault. You can't deny that.

  • Flinch||

    You did more work than the author of this piece. Congratz. There are still too many IF's as you observe, so I wonder if this is not real policy in progress, but a distraction posing as a trial balloon? Creating the illusion of the punitive provides ersatz "relief" on a bad deal - I am not a fan of using tariffs as a bludgeon, as repeating Hoovers mistakes are likely to get the same results.

  • TJJ2000||

    WHAT IF - Nancy Polosi took away all firearms through a Democrats "National Emergency" claim!!!

    An article demonizing Trump upon a "WHAT IF" basis without even a statement to do such.
    vs
    Another "WHAT IF" that was actually stated.

    Talk about Trump-Hate-baiting from what I thought was "Reason" able media. Did the commies buy out Reason or whats going on here.

  • Flinch||

    Let's do 'what if' right. What if... we invented a printer to put stories like this on toilet paper? That might actually be useful.

  • Last of the Shitlords||

    Orange man bad!

  • Olderthandirt-stillkickin||

    Pffft! Trump is a national security threat.........he belongs in a rubber room.

  • TJJ2000||

    Right now Trump IS our only "national security" - the rest is threats.

  • LiborCon||

    Hell yah cars are national security risks.

    In 2017 motor vehicles killed 3.5 times as many people as firearm homicides. 38,659 vs 10,982. Cars are easier to buy than guns! There's not even a background check.

    From 1994 to 2017 motor vehicles killed 250 times as many Americans as terrorists. 3,820 vs 952,565. And terrorists are the greatest threat that America has ever known. These numbers don't lie.

    And yes, the vehicles were responsible for those deaths, the driver's involvement was merely incidental.

  • Flinch||

    CAFE standards are a bigger risk than imports - I'd rather start there, with the thousands of added highway deaths each year it has amassed . But Pelosi's back, gavel in hand, so that's a non-starter.

  • lacraig1||

    Our country was built on taxing imports. We didn't even have an income tax until 1913. The goal of taxing imports is to keep American jobs in America. In the past, foreign made products were always more expensive than American made, but those who bought them didn't care, because they were buying genuine foreign products, like Swiss chocolate, French wine, or Japanese cars. Now they are mostly American products made overseas. You can always make something cheaper somewhere in the world, so if they can do that and send them here tax free, the jobs leave. And that costs us far more than we save on the products we buy. We lose the worker's tax payments plus we pay them for not working. Yes, there will be some adjustments because we have adapted to an economy where wages are low, and everything is made overseas. (Try to find anything apart from food made in the United States.) The best single thing we can do for our economy is to bring all the jobs back. Taxing imports is probably the single most important way to do that. This is brief. I have longer articles on this on my blog poligion1.blogspot.com

  • Jim Strohm||

    "A new study from the Center for Automotive Research estimates that import restrictions would increase new-car prices by $455 to $6,875"

    The last new-to-me car I bought, I spent $2000. I've put about that much more into it since then, and now I have a really sweet 2004 Mercury land yacht with all its creature comforts working perfectly except the heater -- still $2800 below the maximum tariff-tariff on a new car.

    For around $6800 I can nearly build a completely new car from a junkyard body shell and new or refurbished drivetrain parts, and it'll almost outrun a new Mustang. And for that same money, I can pick up a slightly distressed classic car and put it back into perfect roadworthiness ... just without airbags, a black box, nor potentially dangerous ADAS systems. Like the Mercury.

    And before northern liberals complain about the missing Mercury heater, it's a known issue on this car, a $2000 dealer repair job to replace a $30 part inside the dash, and about an hour's work if you know the hack to access the part through the glove compartment. And I live in Austin Texas, where we almost never really need a car heater.

  • Flinch||

    Odd narrative..."may"? Maybe I missed it: did the administration ever mention national security in connection with tariffs? I can't think of a single instance, and the story is zero help - just a supposition thrown at the wall.

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