Proposed [U.S.] Tariffs on Autos, Auto Parts Would Yield Job Losses, Reports Find

Two recent reports conclude that tariffs, quotas, or other trade restrictions that could be imposed in an ongoing section 232 national security investigation of automobiles and auto parts would have net negative impacts on the U.S. economy.

The Department of Commerce self-initiated in May an investigation under section 232 of the Trade Expansion Act of 1962 to determine whether imports of automobiles (including SUVs, vans, and light trucks) and auto parts are harming U.S. national security...

Comments are due by June 22 and rebuttal comments are due by July 6. In addition, a public hearing will be held July 19 and 20 in Washington, D.C. The DOC has up to 270 days (i.e., until Feb. 17, 2019) to conclude its investigation.

If [U.S. Department of] Commerce finds that excessive automobile and auto parts imports are a threat to U.S. national security, and the president concurs, the president has the authority to adjust imports, including through the use of tariffs and quotas. President Trump is reportedly considering tariffs of as much as 25 percent.

A policy brief from The Trade Partnership concludes that “if supporting jobs and strengthening the economy are the motivations for invoking national security reasons for imposing protection,” an additional 25 percent tariff on imported autos and auto parts “would have the opposite impact from that intended.” The brief explains that over the short term (one to three years, when producers have limited ability to replace imports or alter their existing supply chains) the tariff hike would result in a net loss of 157,291 U.S. jobs. There would be an increase of 92,000 jobs in the motor vehicle and auto parts sectors, the brief states, but only 17,676 in the higher-skilled jobs the DOC “cited in launching the review.” There would also be a decrease of 250,000 jobs in the rest of the economy, mostly in services. Further, U.S. economic output is anticipated to decline by 0.1 percent.

A separate study from the Peterson Institute for International Economics examining the same timeframe concludes that a 25 percent tariff would yield a 1.5 percent decline in production and a 1.9 percent drop in employment in the auto and auto parts industries, along with the loss of 195,000 jobs total. If U.S. trading partners imposed retaliatory tariffs, the study adds, these numbers would rise to 4.0 percent, 5.0 percent, and 624,000 jobs.

This is excerpted from 14 June 2018 edition of the Sandler, Travis & Rosenberg Trade Report.