ASSESSMENTS

Why Hitting the Gas on Car Tariffs Could Stall Everyone

Aug 13, 2018 | 08:00 GMT

Cars sit on an assembly line.

If the United States provides no exemptions when imposing a 25 percent tariff on auto sector imports, it could cost over a million U.S. jobs and even plunge the country into a recession, especially amid China's retaliation against previous U.S. tariffs.

(NATALIYA HORA/Shutterstock)

Highlights

  • The United States will continue to threaten tariffs on the imports of automobiles in an attempt to gain leverage in critical trade negotiations, although it's possible that Washington will eventually enact such tariffs.
  • Mexico and Canada might escape strong measures since they would also inflict domestic harm due to the nature of NAFTA integration, but Washington will strive to extract concessions from the two countries by threatening such measures.
  • Germany and the European Union — which has little overall integration with the U.S. auto market — are most likely to face tariffs, even if Brussels has sought to escape the measures by offering a trade deal to the United States.
  • At moderate risk of tariffs, Japan and especially South Korea will hope to avoid U.S. measures by highlighting their automakers' investments in the United States.
 

Today, much of the Western world is holding its collective breath, wondering what comes next as U.S. President Donald Trump threatens to pummel the global auto industry with tariffs on imports. In 2017, the United States imported $350 billion worth of vehicles and parts, most of which came from Canada, Mexico, the European Union, Japan and South Korea – all U.S. allies. But just as he did with steel and aluminum, Trump is threatening to levy tariffs totaling as much as 25 percent on the vehicles and parts of his country's closest allies as part of a Section 232 national security investigation. In doing so, Trump is threatening to upend seven decades of consistent integration in the global automotive industry – something that could have grave ramifications for all....

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