To treat auto imports like a national security threat would be a self-inflicted economic disaster for American consumers, dealers, and dealership employees.
That’s from Cody Lusk, president of the American International Automobile Dealers Association. As you can see, Cody is not amused with Trump’s latest effort to exacerbate global tensions and put the future of international commerce at risk.
Trump’s 232 probe (and the threat of auto tariffs on national security grounds) is a “just when you thought it was safe” type of deal. No sooner had the Chinese slashed their own tariffs on cars and no sooner had Steve Mnuchin assured the world that the trade
war dispute had been “put on hold” than Trump took things up another notch, imperiling relations with Europe, Japan and South Korea, in the process.
Here’s what Japanese Trade Minister Hiroshige Seko said Thursday:
Imposing broad, comprehensive restrictions on such a large industry could cause confusion in world markets, and could lead to the breakdown of the multilateral trade system based on WTO rules.
Meanwhile, China has expressed its disapproval as well which is both ironic considering their own barriers and also amusing to the extent they’re probably a bit surprised at the sheer brazen insanity of a guy who one minute is calling for truces and praising Xi’s concessions and the next minute is instructing the Commerce Department to try and figure out if it’s possible to accuse some of America’s staunchest allies of threatening U.S. national security by selling cars to people.
“China opposes the abusing of national security provisions, which would severely undermine the multilateral trading system, and disrupt the normal trade order”, China’s Ministry of Commerce said, in a statement.
I guess we should have seen this coming. As is customary for a man who treats everything like a reality TV show, Trump tipped the move earlier in the day:
There will be big news coming soon for our great American Autoworkers. After many decades of losing your jobs to other countries, you have waited long enough!
— Donald J. Trump (@realDonaldTrump) May 23, 2018
Automakers the world over were crushed on this. In Japan:
And in Europe:
Mazda really it took in on the chin overnight. This was the worst day in a long, long time for the shares:
As Bloomberg notes, “among the world’s carmakers, Mazda, Tata Motors Ltd.’s Jaguar Land Rover unit and Mitsubishi would be hit hard [as] all vehicles that the companies sell in the U.S. are imported.”
Mexico will of course be fucked as tariffs will erode incentives for companies to take advantage of low-cost workers.
As far as exports to the U.S., when it comes to passenger cars, Mexico sends the most followed by Canada, Japan, Germany and South Korea.
Obviously, part of this is Trump attempting to gain some leverage in the NAFTA negotiations.
Of course using Section 232 in this context is probably some semblance of absurd.
“Using [it] against steel and aluminum was already a stretch, a violation of the World Trade Organization and against the spirit and the letter of the law [but] using it against autos would be preposterous,” Mexican economist Luis de la Calle, a part of the original NAFTA negotiating team said, adding that “the national security exemption is a privilege to use in case of war [and] this has little to do with national security and a lot to do with national politics.”
Trump would invariably say something like this: “they asked for it.”
But as far as actual automakers are concerned, it’s the same story: no one has any idea what Trump is doing.
Here’s what John Bozzella, head the trade group Global Automakers (they represent Toyota, Nissan, and Hyundai, among other companies) had to say, for instance:
To our knowledge, no one is asking for this protection. This path leads inevitably to fewer choices and higher prices for cars and trucks in America.
And you know, this is especially ironic considering that the steel and aluminum tariffs were already set to affect downstream industries, raising the specter of higher auto prices. This just makes things worse.
But you know, “have very stable genius, will travel.”
Except that the car you’re traveling in will be more expensive. And the gas you’re putting it in will cost you more too, in part because Trump exited the Iran deal.