Comment The great barrier grief for world’s car makers
in Germany and China. If anything, the new plant in Mexico might take jobs from those plants, and create demand for some components from the United States and hence jobs in the US.
BMW didn’t seem fazed by Trump’s latest comments.
An executive stated that the firm would stick to plans to invest some one billion dollars in Mexico, creating 1,500 jobs. carmakers have quadrupled car output in the US over the past seven years to 850,000 units, more than half of which are exported.
It also pointed out that German carmakers employ about 33,000 workers in the United States and German automotive suppliers about 77,000 more.
The VDA President Matthias Wissmann stressed that “in the long term, the United States would be shooting itself in the foot by imposing tariffs or other trade barriers.”
BMW itself noted that the firm is “very much at home in the US,” employing directly and indirectly nearly 70,000 people in the country.
Meanwhile, Germans might not drive many of those Chevrolets (owned by GM) that Trump mentioned, but they do drive lots of Opels (also owned by GM), Fords, and cars made by Fiat Chrysler. Indeed, Jeeps are an increasingly common sight on European roads.
Nevertheless, Trump’s latest comments raise uncertainty for auto makers that could impact on their strategic decisions in quite a big way. While the US Constitution gives the President authority to negotiate international agreements, it doesn’t assign him specific power over international commerce and trade. Rather, the Constitution gives Congress the power to impose and collect taxes, tariffs, duties, and to regulate international commerce.
However, through legislation, Congress can and does delegate some of its power to the President, such as the power to change tariffs under certain circumstances.
So the President is able to look for authority for tariff related action in statute.
In general, the President, acting unilaterally via executive action, can impose tariffs of up to 15 per cent and for 150 days, and a challenge to such action can take months to be effective.
An example of Presidential action I use with my first year Political Economy students is the decision by George Bush to imposed heavy tariffs on steel imports into the US back in 2002 in order to ‘safeguard’ the US steel industry.
After complaints from a range of countries, the WTO eventually ruled the tariffs to be in breach of WTO Treaty obligations (as there had been no surge in imports).
Eventually Bush ended the tariffs but not until it had given several years of protection to the US steel industry and cost European producers hundreds of millions of Euros in lost exports to the US that they never recovered.
It may have also brought Bush plenty of steel workers’ votes in the process, but pushed up production costs for (ironically) US auto makers.
The point is that while the WTO can ultimately rule that any new tariffs breach WTO rules and should be removed (or reciprocal measures taken), there is scope for Trump and his advisers to create plenty of challenges for major auto firms in the short to medium term. Professor David Bailey, Aston Business School
Trump’s latest comments raise uncertainty for auto makers that could impact on their strategic decisions in quite a big way