Automakers: More tariffs would drive up car prices

Witnesses tell Senate committee that additional duties on automotive imports would exacerbate effects of steel and aluminum tariffs.    If President Donald Trump follows through with imposing additional tariffs on automotive imports, it would likely compound the effect of expected car price increases after Section 232 tariffs were imposed on steel and aluminum earlier this year, Association of Global Automakers CEO John Bozzella said during a hearing of the Senate Health, Education Labor & Pensions (HELP) Committee on Wednesday.
   “There is no question that these price increases would be significant,” Bozzella said.
   Twenty-five percent tariffs on automobile imports to the U.S. would raise prices by an estimated $2,000 to $7,000 per car. Trump repeatedly has threatened car tariffs on various trading partners as he seeks leverage in trade negotiations.
   Meanwhile, the Commerce Department is investigating the national security impacts of automotive imports under Section 232 of the Trade Expansion Act of 1962, which could provide a justification for tariffs, depending on its conclusions.
   Automotive production costs already are higher as a result of Section 232 steel and aluminum tariffs; whether the cost spikes will translate to higher prices depends on the competitiveness particular vehicle segments and responses of individual companies, Bozzella said.
   “A company could, frankly, just take less profit or take a loss on the vehicle — or they could pass on the price,” he said. “I think we will see a price increase.”
   HELP Committee Chairman Lamar Alexander, R-Tenn., noted SteelBenchmarker.com data showed that steel prices have risen 40 percent since Jan. 1, while Nissan reports that steel composes 70 percent of the vehicles it produces in Tennessee and Mississippi.
   Alexander and Bozzella said rising steel import prices have spurred higher domestic steel prices as well.
   Tariffs newly implemented under Trump, however, affect only 0.1 percent of the U.S. economy, said Thea Lee, president of the liberal Economic Policy Institute, during the committee hearing. Tariffs to be potentially implemented in the coming months and years would total only about 0.8 percent of GDP at most, even assuming that tariffs apply to all motor vehicles and parts, she said.
   Lee and Heritage Foundation distinguished visiting fellow Stephen Moore agreed during the hearing, however, that the Trump administration’s trade policy has been largely incoherent, but Moore expressed optimism that the short-term pain wrought by tariffs will ultimately yield long-term gain.
   “It’s about time we maybe start giving Donald Trump the benefit of the doubt here … [with] the improvement in the economy over the last 20 months,” Moore said. “I do think that there are problems with this [trade] strategy. I do think it lacks coherence. Six months from now, let’s see where we’re at. I’m an optimist. I do think we’re going to see some greatly improved trade deals.”