U.S. de­clares for­eign cars se­cu­rity risk

Trump de­lays auto tar­iff but reaches deal on steel, alu­minum with Canada and Mex­ico

The Detroit News - - FRONT PAGE - BY KEITH LAING The Detroit News

Wash­ing­ton — Pres­i­dent Don­ald Trump inched closer Fri­day to plac­ing tar­iffs as high as 25% on im­ported cars un­der the guise of pro­tect­ing na­tional se­cu­rity, leaning into a tough-on-trade per­sona he sees as help­ing him po­lit­i­cally.

At the same time, Trump agreed Fri­day to lift tar­iffs on Cana­dian and Mex­i­can steel and alu­minum that have been in place for a year, in fa­vor of stronger en­force­ment. It’s part of a bid to win sup­port for the pro­posed re­place­ment of the North Amer­i­can Free Trade Agree­ment, known as the United States-Mex­ico-Canada Agree­ment.

The twin moves re­veal a pres­i­dent who uses the ham­mer of tar­iffs as a first move in trade ne­go­ti­a­tions, much to the dis­may of some do­mes­tic in­dus­tries, in­clud­ing car­mak­ers.

In the lat­est sign of the strat­egy, the White House con­firmed Fri­day the U.S. Com­merce De­part­ment has con­cluded im­ported ve­hi­cles and parts from Europe, Ja­pan and other na­tions are a na­tional se­cu­rity threat, clear­ing the way for tar­iffs as high as 25% un­der a sec­tion of fed­eral law that al­lows the pres­i­dent to uni­lat­er­ally im­pose du­ties to pro­tect the nation from se­cu­rity threats.

The White House said Trump, who de­clared “I am Tar­iff Man” in a De­cem­ber 2018 tweet, signed a procla­ma­tion that di­rects U.S. Trade Rep­re­sen­ta­tive Robert Lighthizer “to ne­go­ti­ate agree­ments to ad­dress the na­tional se­cu­rity threat, which is caus­ing harm to the Amer­i­can au­to­mo­bile in­dus­try” within 180 days. Ab­sent such agree­ments, the White House said Trump will de

ter­mine whether and what fur­ther action needs to be taken.

“He wants to put the bul­let in the gun, put the gun on the ta­ble and start talk­ing,” Kristin Dz­iczek, vice pres­i­dent of the Cen­ter for Au­to­mo­tive Re­search, told a Michi­gan leg­isla­tive panel Fri­day in Lansing. “And if things don’t go so well, he’s go­ing to pick up the gun and put on the tar­iffs.”

The Cen­ter for Au­to­mo­tive Re­search has said the price of im­ported ve­hi­cles would go up an av­er­age of $3,700 if 25% tar­iffs are im­posed. The av­er­age price of a U.S.-built car would in­crease $1,900 due to tar­iffs on im­ported parts.

The con­fir­ma­tion of the Com­merce De­part­ment’s find­ings is the cul­mi­na­tion of months of con­cern by do­mes­tic and for­eign-owned au­tomak­ers who ar­gued ve­he­mently against such a dec­la­ra­tion.

“Ev­ery­body in this in­dus­try is op­posed to this action,” John Bozzella, CEO of the As­so­ci­a­tion of Global Au­tomak­ers, which lob­bies for for­eignowned au­tomak­ers in Wash­ing­ton, said in an interview with The Detroit News.

“You can’t find any­body in this big, broad in­dus­try who is in fa­vor of this action,” Bozzella con­tin­ued. “This is not about ‘Gee, this is a con­cern for in­ter­na­tional man­u­fac­tur­ers.’”

The pres­i­dent framed the in­ves­ti­ga­tion into the na­tional se­cu­rity im­pact of im­ported ve­hi­cles as a bid to pro­tect Amer­i­can au­towork­ers, who may be cru­cial to his success in in­dus­trial Mid­west states like Michi­gan in his 2020 re-elec­tion bid.

“The rapid ap­pli­ca­tion of com­mer­cial break­throughs in au­to­mo­bile tech­nol­ogy is nec­es­sary for the United States to re­tain com­pet­i­tive mil­i­tary ad­van­tage and meet new de­fense re­quire­ments,” Trump said in the procla­ma­tion.

Bozzella said high tar­iffs on im­ported ve­hi­cles and parts would harm the en­tire U.S. auto in­dus­try

“More than half the ve­hi­cles pur­chased in the U.S. have in­ter­na­tional name­plates,” he said. “Half the ve­hi­cles built here by Amer­i­can work­ers are the result of in­ter­na­tional in­vest­ment.”

Bozella pointed to Honda Mo­tor Co.’s in­vest­ment in GM’s San Fran­cisco-based GM Cruise LLC as an ex­am­ple. Honda is in­vest­ing $2.75 bil­lion in Cruise to co-de­velop a new au­ton­o­mous ve­hi­cle.

“That’s a U.S.-based in­no­va­tor de­vel­op­ing self-driv­ing tech­nol­ogy,” he said. “That’s how this in­dus­try works.”

Bozzella noted Trump could have ruled out new tar­iffs on im­ports com­pletely, but in­stead opted for only a short-term re­prieve. He said of the pres­i­dent’s reliance on tar­iffs in trade ne­go­ti­a­tions: “This strat­egy has con­se­quences. That con­se­quence is sig­nif­i­cant pain for Amer­i­can con­sumers and sig­nif­i­cant pain for au­tomak­ers.”

The Al­liance of Au­to­mo­bile Man­u­fac­tur­ers, which lob­bies for do­mes­tic and for­eign-owned car man­u­fac­tur­ers in Wash­ing­ton, agreed, say­ing in a state­ment that “by boost­ing car prices across the board and driv­ing up car re­pair and main­te­nance costs, tar­iffs are es­sen­tially a mas­sive tax on con­sumers.”

Most pop­u­lar mod­els from for­eignowned au­tomak­ers are built by U.S. work­ers at plants in the south­east­ern U.S., where la­bor laws are more lax and the United Auto Work­ers union has strug­gled to a gain a foothold.

The top-sell­ing car im­ported to the U.S., the Subaru Forester com­pact SUV, is built in Ja­pan. A 25% tar­iff would mean the base price would ef­fec­tively in­crease from $24,295 to $30,368 if the man­u­fac­turer didn’t shoul­der any of the dif­fer­ence. More likely, the added cost of the Forester — and the Ja­pan-built Im­preza and Crosstrek — would be spread across the lineup. Subaru sold 171,613 Foresters in the U.S. in 2018.

Porsche would also be hit hard. Its top-sell­ing ve­hi­cle, the Ger­man-built Ma­can com­pact SUV, would see its ef­fec­tive base price rise from $49,900 to $62,375 un­der the same sce­nario. Porsche sold more than 23,500 Ma­cans in the U.S. last year. Un­der its cur­rent pro­duc­tion setup with all ve­hi­cles built in Ger­many and Slo­vakia, ev­ery ve­hi­cle in the Porsche lineup would be sub­ject to tar­iffs.

Toy­ota re­buked the na­tional-se­cu­rity procla­ma­tion by the U.S. govern­ment. In a strongly worded state­ment, the Ja­panese au­tomaker called it “a ma­jor set­back for Amer­i­can con­sumers, work­ers and the auto in­dus­try,” and said it “sends a mes­sage to Toy­ota that our investment­s are not wel­comed, and the con­tri­bu­tions from each of our em­ploy­ees across Amer­ica are not val­ued.”

Toy­ota said it di­rectly and in­di­rectly em­ploys over 475,000 in the U.S. across its re­search and de­vel­op­ment cen­ters, 10 man­u­fac­tur­ing plants, 1,500 deal­ers, sup­ply chains and other op­er­a­tions. It said it has in­vested over $60 bil­lion in the United States.

Do­mes­tic car­mak­ers have fret­ted about the possibilit­y of re­tal­ia­tory tar­iffs on exports of their prod­ucts.

The pres­i­dent has sought to down­play trade-war fears, ar­gu­ing the U.S. is col­lect­ing more money from tar­iffs than it has in years.

That has done lit­tle to sway Amer­i­can farm­ers who have been hit hard by re­tal­ia­tory tar­iffs China im­posed on im­ports of soy­beans, pork and other agri­cul­tural prod­ucts.

The pres­i­dent’s ar­gu­ment does not ap­pear to be hold­ing sway with many law­mak­ers. Even sev­eral of Trump’s fel­low Repub­li­cans in Con­gress have ex­pressed dis­may about the pres­i­dent’s tar­iffs-first, ne­go­ti­ate-later strat­egy.

“He be­lieves in tar­iffs as a tool to get a ne­go­ti­a­tion as op­posed to be­ing an end in them­selves,” U.S Sen. Chuck Grass­ley, R-Iowa, chair­man of the U.S. Sen­ate Fi­nance Com­mit­tee, said in an interview with Capi­tol Hill news­pa­per Politico. “If he has used tar­iffs be­cause he be­lieves they’re good, and I know he says that, but I don’t be­lieve he ac­tu­ally be­lieves that. I don’t see how he could be­lieve it.”

Wash­ing­ton-based Repub­li­can strate­gist John Fee­hery said pro­tec­tion­ist stances have played well po­lit­i­cally in the past for Trump, and he pre­dicted it would help the pres­i­dent again in 2020.

“I think stand­ing up to China is a pow­er­ful po­lit­i­cal ar­gu­ment for Pres­i­dent Trump, and it takes away a key talk­ing point of Democrats who tra­di­tion­ally have ar­gued against free mar­kets and for pro­tec­tion­ism,” he said.

Adrian He­mond, a Demo­cratic strate­gist with the bi­par­ti­san Grass­roots Mid­west con­sult­ing firm, dis­agreed. He said if tar­iffs tank the econ­omy, Trump could be in trouble with the vot­ers who pow­ered him to the White House.

“Re­gard­less of what you think about this pol­icy, and I think it’s bad, the pres­i­den­tial elec­tion is next year,” He­mond said. “If tar­iffs start to bite on con­sumers, that’s not good. If it starts to bite on up­per Mid­west­ern durable goods man­u­fac­tur­ers, that’s even worse.”

Keith Laing, / The Detroit News

A Volk­swa­gen Bee­tle at the Wash­ing­ton Auto Show has a mes­sage for politi­cians in the nation's cap­i­tal.

Brian Bowen

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