Global automakers gear up for day-long fight in D.C. against U.S. tariffs on cars, car parts

• Tariffs could add $83B cost to U.S. cars
• BMW not invited to speak at Thursday's hearing
• UAW: tariffs investigation 'long overdue'

A who's who of the auto industry and international trade community shared some fighting words Thursday as the U.S. Department of Commerce held an all-day hearing over the pros and cons of a proposed 25-percent tariff on imported cars and parts.

With the exception of the United Auto Workers, which supported "targeted" protections, testimony from the roughly 45 individuals who spoke was overwhelmingly against tariffs. Such measures, they said, would increase costs to consumers, deeply disrupt supply chains, erode international relations, and drive down production — killing thousands of U.S. auto-industry jobs.

The hearings started Thursday morning with Commerce Secretary Wilbur Ross saying it's "too early to say if investigation will ultimately result in (tariffs) on national security grounds" but that President Donald Trump understands the auto industry is "indispensable."

The premise of the tariffs, proposed in May by Trump, is national security.

BMW officials said late Wednesday that they would watch the hearing closely while representatives from Volkswagen, Hyundai, the European Union, Mexico and Canada (among other nations), and multiple auto industry groups in the U.S. and abroad gave testimony.

Ambassadors: national security threat 'absurd', retaliation 'inevitable'

European Union ambassador David O’Sullivan said the commerce department's investigation into national security threats posed by auto imports "lacks legitimacy (and) any factual basis." Trump's suggestion that auto imports from Europe, Canada, Mexico, South Korea and Japan threaten security, he added, "is, bluntly, absurd."

Such tariffs could, he added "lead the U.S. into a violation of international law."

Kirsten Hillman, Canadian deputy ambassador to the U.S., said rather than strengthening security, tariffs on imported autos/parts "would undermine security and have a devastating effect on the automotive sector."

Mexican Ambassador Geronimo Gutierrez Fernandez said there is no question that integrated auto production with Canada and Mexico helps make U.S. producers competitive.

Mexico, he said, will retaliate against any "unjustified" trade measures. Canada's deputy ambassador echoed that, saying that if the U.S. imposes tariffs on imported autos/parts, Canada too would retaliate, just as it has on aluminum/steel tariffs.

"If auto tariffs are imposed, everybody loses, said Jim Wilson, Ontario’s minister of economic development. "We are stronger and more prosperous together." 

Commerce department officials ask no questions of the international group though the agency is investigating whether these countries' auto imports threaten American security.

Korean automaker: We have stuck by the U.S. 

John Hall, a maintenance worker for Hyundai in Alabama, spoke against auto-import tariffs, saying "Hyundai has stuck with workers ... in good times and bad."

People may look at company as foreign, Hall said, but "I know from experience we are an integral part of the American auto industry."

Auto advocates: Tariffs 'will result in fewer jobs'

First up on the agenda Thursday was the Alliance of Automobile Manufacturers'  Jennifer Thomas.

"Tariffs are the wrong approach," Thomas said. "The opposition is widespread indeed" and "will harm American workers, families and the economy." 

Missouri Gov. Matt Blunt, president of American Auto Policy Council (which includes Fiat-Chrysler, Ford and GM) said the auto industry is "grateful" for Trump's leadership. "Clearly (he has) made the auto industry a priority."

"We are however very concerned that the positive effects of the president's policies could be undermined by tariffs." Blunt said auto imports "don't pose a national security threat" and will result in fewer jobs "by increasing the costs of manufacturing cars … and ultimately fewer jobs."

Peter Welch, president of the National Automobile Dealers Association, said that regarding research and development, tariffs are "going to be detrimental, pure and simple."

Unions: Low-wage countries depress U.S. wages

The United Auto Workers' Jennifer Kelly, director of the UAW's research department, said that while auto-making and the making of parts has moved out of the United States, "the remaining US workers' wages have been depressed by competing with low-wage countries."

"NAFTA’s useful, but a job in Mexico is not a job in the U.S," she said. 

"It's our hope that the Trump administration will take targeted measures to protect domestic manufacturing," Kelly said, adding that the commerce department's investigation into auto import tariffs is "long overdue."

"Trade has .... hurt workers at the bargaining table," she said. "In the past two decades, the auto trade deficit has grown 121 percent."

Taxpayer union: We need fewer tariffs, not more

From Ann Wilson of the Motor & Equipment Manufacturers Association, who said tariffs will cost jobs: A survey of parts manufacturers shows 80 percent of respondents say they would cut jobs, delay R&D and shift jobs outside the U.S.

"Tier One suppliers provide 77 percent of the content value of new vehicles," she said. "They are dependent on inputs from around the world."

Bryan Riley of the National Taxpayer Union Free Trade Initiative said 98 percent of written comments on proposed auto tariffs are against them.

"The countries that are the most prosperous... have the most economic freedom," he said. "Tariffs are not the remedy, they’re the virus… we need to move in the direction of more economic freedom."

John Bozzella with the Association of  Global Automakers said no domestic company has asked for tariff protections and took exception to the Trump administration asking to use an "archaic" rule to demand sensitive information from car makers as part of an investigation. This, he said, was a "highly intrusive, over broad, intrusive tactic” and shows the president has no evidence of security concerns.

"There is simply no support for the proposition that the import of (autos ) threatens the national security," Bozella said.

Economic impact

A 25 percent tariff would raise the price of an imported car nearly $6,000 and the price of a U.S.-built car $2,000, according to the Alliance of Automobile Manufacturers.

"This would equate to an $83 billion tax on U.S. consumers that would trigger a domino effect on the industry and economy," the group's transcript said. "When vehicle prices rise, demand drops. Lower demand means less production. And when production declines, job losses follow."

Up to 200,000 American auto workers would lose their jobs if a 25 percent tariff were imposed, according to the Alliance, which quoted a Peterson Institute analysis. That number could climb to 600,000 if other countries imposed retaliatory tariffs.

BMW's interests 'represented'

BMW – a frequent target of Trump’s criticism – did not make it onto the hearing's agenda to speak, though the German automaker had thought it would be a possibility, said company spokesman Kenn Sparks.

"The interests of BMW and of those like us will certainly be represented at the hearings," Sparks said.

But the company made its position clear in a June 28 letter to Department of Commerce Secretary Wilbur Ross. In it a BMW representative noted that free trade boosts the American economy and preserves global order and peace.

"BMW directly and indirectly adds $6.3 billion annually to South Carolina’s
economy and leads to the employment of 36,285 people there," the letter noted.

BMW employs more than 10,000 people at its Spartanburg County plant and last year launched a multi-year, $600 million expansion that will increase jobs there to 11,000. The plant is on track to produce more than 400,000 vehicles there this year, of which about 70 percent are exported.

BMW stated in its letter that it opposes the European Union's 10 percent tariff on imported vehicles.

"They send Mercedes, they send BMWs," Trump said of the European Union during a campaign rally last month. "They send everything, we practically tax them nothing. We can't send our cars and if we do they charge many many times the tax that we stupidly don't charge."

Trump went on to say,"It's all going to work out, because we are the piggy bank that they like to take from."