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Study Sees Escalating Damage From Trump Auto Tariffs
Yangzhou Chengsen Plastics Co.,Ltd | Updated: Jun 08, 2018

U.S. Department of CommerceCommerce Secretary Wilbur Ross speaks at an event earlier this year.

Washington — The Trump administration is considering a 25 percent tariff on imported cars and auto parts to help support the domestic auto industry, but two new studies find that it would have the opposite effect over a three-year period.

First-order negative effects of tariffs on the auto industry and the broader economy would be modest, but the damage increases if trading partners retaliate with restrictions on U.S. exports, they said.

A report by the Peterson Institute for International Economics in Washington predicts vehicle manufacturing would suffer a 1.5 percent loss in productivity, resulting in a 2 percent drop in auto sector employment, or 20,000 jobs, as the tariffs raise auto prices for consumers and reduce demand. The ripple effects of reduced sales and shipping activity would lead to 195,000 lost jobs in the overall economy.

Counter tariffs on U.S. auto exports would reduce domestic auto production by 4 percent, costing 50,000 industry jobs and 624,000 total jobs.

The Trade Partnership, a Washington-based econometric firm, said the tariffs would result in three lost jobs in the broader economy for every job gained (92,000) in the auto sector, and would raise the cost of a $30,000 car by about $6,400. The GDP would decline by 0.1 percent as higher costs, net job losses, and declines in producer and consumer spending power work their ways through the economy.

"It's not to say this action throws the U.S. economy into a tailspin, but why are you taking it when it makes things worse for U.S. firms and workers?" PIIE co-author and senior fellow Jeffrey Schott told Automotive News. AN is a sister publication of Plastics News.

The Department of Commerce, invoking its rarely used national security authority to protect domestic industry, announced an investigation in May into whether imports of autos and auto parts posed a security threat. Commerce Secretary Wilbur Ross justified the review on grounds that economic security equals national security, but critics of the action say the 1962 law is intended for use in wartime situations and that the administration's decision opens the door for other countries to take protectionist measures on the pretext of national security.

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