US tariffs on car imports are a double-edged sword

NEW YORK: US President Donald Trump’s threat to tax imported cars in the name of national security risks weakening domestic manufacturers, but could accelerate the renegotiation of the North American Free Trade Agreement.

At the end of the Group of Seven summit, Trump renewed his threat to impose tariffs on cars imported into the United States by manufacturers accused of unfairly taking market share from American carmakers.

But this decision – part of Trump’s ‘America First’ efforts to redress trade imbalances – may be counterproductive because not only do most of the targeted manufacturers have factories in the US, but American carmakers are among the largest importers of vehicles from Canada and Mexico.

The move would also come at a time when China – the world’s largest car market – is moving in the opposite direction, lowering taxes on imported vehicles from 25 to 15 per cent.

“The Honda Accord is not a threat to our national security,” tweeted Jeb Hensarling, the Republican head of the House Finance Committee. “However, taxing it with trade tariffs is a threat to the economic security of millions of hardworking American families,” he wrote.

The Trade Partnership Worldwide consultancy estimates that additional taxes of 25 per cent would create 92,000 industrial jobs in the US but would result in the destruction of 250,000 jobs in the larger economy.

About one million jobs are currently tied to the auto industry, up from 660,000 in 2010, according to the US Bureau of Labor Statistics. — AFP