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Business Roundtable Comments on the Section 232 National Security Investigation of Imports of Automobiles, Including Cars, SUVs, Vans and Light Trucks, and Automotive Parts

Business Roundtable appreciates the opportunity to provide comments on the above referenced Section 232 national security investigation. Business Roundtable strongly opposes the use of Section 232 to impose tariffs on imports of automobiles, including cars, SUVs, vans and light trucks, and automotive parts for three reasons.

First, investigations under Section 232 are rare and traditionally pursued in cooperation with the targeted U.S. industry, which is in the best position to evaluate its current and future economic position, and its ability to work with U.S. government departments and agencies in support of U.S. national security. In this case, the U.S. auto industry is prospering and is not seeking protection. According to the Alliance of Automobile Manufacturers, which represents 70 percent of all car and light truck sales in the United States, during the last 25 years, 15 new manufacturing plants have been launched in the United States—resulting in the creation of 50,000 new direct jobs and 350,000 indirect auto jobs across all states. The Alliance has stated clearly that it is “confident that vehicle imports do not pose a national security risk to the U.S.” Moreover, the Administration’s repeated emphasis on using this investigation to create negotiating leverage with the EU and other countries with higher auto import tariffs than the U.S. has, and with Mexico and Canada in the NAFTA negotiations, casts doubt that this investigation is truly about national security.

Second, the Administration’s use of Section 232 will result in serious negative domestic economic consequences. A May 31, 2018 Peterson Institute for International Economics Report (PIIE Report) concludes that if President Trump raises U.S. duties to 25 percent on all auto-related imports, U.S. production in these industries will fall 1.5 percent and cause 195,000 U.S. workers to lose their jobs over a one-to-three-year period. The PIIE Report also concludes that if other countries retaliate in-kind with tariffs, U.S. production would fall 4 percent, 624,000 U.S. jobs would be lost, and 5 percent of the workforce in the auto and parts industry would be displaced. Further, a May 29, 2018 study from Trade Partnership Worldwide estimates that 25 percent duties on auto-related imports would raise the cost of a $30,000 imported car by $6,400. Prices for domestic-manufactured cars also would increase due to higher costs for foreign components. Put another way, a 25-percent tariff on the average-priced imported car ($23,200) could erase roughly 10 percent ($5,800) of the median U.S. household’s income ($59,000), according to Senate Finance Committee Chairman Orrin Hatch. These projected negative economic consequences are not unexpected given recent studies on the impact of the Section 232 tariffs on steel and aluminum imports that projected adverse impacts on the U.S. economy. For example, a separate June 5, 2018 study by Trade Partnership Worldwide shows that the Section 232 tariffs on steel and aluminum, after accounting for retaliation, would itself result in a net loss of over 470,000 American jobs, including thousands in the motor vehicle and parts sector. We are now seeing these losses take place. Given these circumstances, we strongly encourage the Administration to give serious consideration to the potential for adverse U.S. economic consequences before concluding this new Section 232 investigation.

Third, we have already seen the impact of retaliatory tariffs from other countries, based on the use of Section 232 in the steel and aluminum investigations. We anticipate similar reactions if the Administration imposes Section 232 tariffs on autos and parts. The EU, Mexico, Canada, Turkey, India and China have already retaliated against the United States’ imposition of Section 232 tariffs on steel and aluminum. Japan and Russia are considering their own retaliation. We are deeply concerned that by using Section 232, the Administration is setting in motion a trade conflict that undermines national and international economic growth, job creation and the international trading system, rather than enhancing any of those core U.S. interests.

Under these circumstances, the Administration should determine that auto-related imports are not adversely affecting the U.S. national security pursuant to Section 232. The Administration should also reevaluate its prior Section 232 decisions and terminate the Section 232 tariffs on steel and aluminum imports.

For additional information, please contact:
David Thomas
Vice President
Business Roundtable
300 New Jersey Avenue, NW, Suite 800
Washington, DC 20001
Phone: (202) 496-3262
Email: dthomas@brt.org