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Automakers Warn U.S. Tariffs Will Raise Prices & Cost Hundreds of Thousands of Jobs

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【Summary】Two major auto trade groups on Wednesday warned the Trump administration that imposing up to 25 percent tariffs on imported vehicles would cost hundreds of thousands of auto industry jobs, dramatically hike prices on vehicles and threaten investment in self-driving technology.

Eric Walz    Jun 27, 2018 2:42 PM PT
Automakers Warn U.S. Tariffs Will Raise Prices & Cost Hundreds of Thousands of Jobs

Two major auto trade groups on Wednesday warned the Trump administration that imposing up to 25 percent tariffs on imported vehicles would cost hundreds of thousands of auto industry jobs, dramatically hike prices on vehicles and threaten investment in self-driving technology, Reuters has reported.

A coalition representing major foreign automakers including Toyota, Volkswagen AG, BMW and Hyundai Motor Co, said the tariffs would harm automakers and U.S. consumers.

"The greatest threat to the U.S. automotive industry at this time is the possibility the administration will impose duties on imports in connection with this investigation," wrote the Association of Global Automakers representing major foreign automakers. "Such duties would raise prices for American consumers, limit their choices, and suppress sales and U.S. production of vehicles."

The group added: "Rather than creating jobs, these tariffs would result in the loss of hundreds of thousands of American jobs producing and selling cars, SUVs, trucks and auto parts."

In May, the Trump administration launched an investigation into whether imported vehicles pose a national security threat and President Trump threatened to impose a 20 percent tariff on all imports of EU-assembled cars. On Tuesday Trump said tariffs are coming soon.

"We are finishing our study of Tariffs on cars from the E.U. in that they have long taken advantage of the U.S. in the form of trade barriers and tariffs. In the end it will all even out - and it won't take very long!" Trump tweeted.

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The Alliance of Automobile Manufacturers, representing General Motors, Ford, Daimler AG, Toyota and others, urged the administration in separate comments filed Wednesday not to go forward with the proposed tariffs.

"We believe the resulting impact of tariffs on imported vehicles and vehicle components will ultimately harm U.S. economic security and weaken our national security," the group wrote, calling the tariffs a "mistake" and adding imposing them "could very well set a dangerous precedent that other nations could use to protect their local market from foreign competition."

The Alliance said its analysis of 2017 auto sales data showed a 25 percent tariff on imported vehicles would result in an average price increase of $5,800, costing American consumers nearly $45 billion annually.

The tariffs come at a time when the auto industry is undergoing a transformation with a push towards electrification and autonomous driving. Automakers are concerned tariffs will mean less capital to spend on self-driving cars and electric vehicles.

"We are already in the midst of an intense global race to lead on electrification and automation. The increased costs associated with the proposed tariffs may result in diminishing the U.S.' competitiveness in developing these advanced technologies," the Alliance wrote.

Both automotive trade groups cited a study by the Peterson Institute for International Economics that the cost to U.S. jobs from the import duties would be 195,000 jobs and could be as high as 624,000 jobs if other countries retaliate.

Trump has made the tariffs a key part of his economic message and repeatedly lamented over the U.S auto sector trade deficit, particularly with Germany and Japan.

The Commerce Department has asked if it should consider U.S. owned auto manufacturers differently than foreign automakers. However, the Association of Global Automakers rejected that contention, saying its members "are no less patriotic or willing to serve their country in a time of crisis than any other Americans."

The Alliance said "there is no basis to claim that auto-related imports are a threat to national security" and noted that 98 percent of U.S. auto imports came from U.S. national security allies.

United States now has 45 assembly plants operated by both U.S. and foreign automakers which produced nearly 12 million vehicles in 2017. "We are confident that today's U.S. production capabilities are more than sufficient to satisfy our country's future security needs," the Alliance wrote.

Japanese automaker Toyota, which builds Camry the top selling sedan in the U.S., responded today to Trump's comments about being a national security threat.

Toyota released the following statement:

"A hundred and thirty-seven thousand Americans support their families working for Toyota, and Toyota and Lexus dealerships. They are not a national security threat. Indeed, Toyota operates 10 manufacturing plants in the U.S.  We are an exemplar of the manufacturing might of America.  A 25% tariff on automotive imports, which is just a tax on consumers, would increase the cost of every vehicle sold in the country. Even the Toyota Camry, the best-selling car in America, made in Georgetown, Kentucky, would face $1,800 in increased costs.  We believe the only plausible outcome of this investigation is to reject the notion that automotive imports threaten national security."


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