The threat of Trump's auto tariffs is keeping the industry waiting: NPR

The Trump administration's trade war with China continues to shake the markets and make the headlines. But this is not the only commercial tension in the city.

For about a year, the White House has been considering the possibility of imposing tariffs or quotas on cars and car parts imported from close allies in Europe and Japan.

The automobile industry is united in the face of tariffs. But automakers and automakers may have to wait to see if their arguments have been heard.

While the administration is facing a deadline set on Saturday on the issue of tariffs, the White House should largely opt for an extension rather than making an announcement in one way or another .

The hypothetical auto rates would be promulgated in the name of national security, under the same power "under section 232" that used by Trump to impose tariffs on steel and aluminum.

These tariffs have boosted US steel and aluminum producers, while increasing costs for the many US manufacturers that use metals in their products.

The car rates would be different, because the industry is so intertwined in the world. Instead of helping some American companies and harming others, section 232 tariffs would increase costs for both builders and suppliers. According to industry analyzes, hundreds of thousands of jobs would be lost without even considering retaliatory tariffs.

"The whole industry is very much against it," said Ann Wilson, Senior Vice President of Government, Motor and Equipment Manufacturers Association.

Of course, the possibility The White House can use these tariffs as a bargaining tactic – a means of pushing for more favorable trade agreements – without ever setting tariffs. David Schwietert, Acting CEO of Auto Alliance, said that if that was the strategy, the goals could be commendable. But tactics have costs, he says.

"This has a deterrent effect," he says. "Just the short-term threat of even the implementation of such tariffs, not to mention what would happen economically should it be imposed."

Prolonged uncertainty is holding back investments and preventing automakers from planning for the future, he said. "The sooner will be resolved, the better – not only for manufacturers, but also for the economy."

A question of national security?

So how are car imports endangering national defense? The experts are skeptical, to say the least, on the least convincing argument. But nobody knows exactly what the argument of the administration would be.

In February, the Department of Commerce submitted a report on the subject, but it has never been made public. Even Senator Chuck Grassley, the Republican Chairman of the Senate Finance Committee, did not see it – despite multiple requests to the administration.

But no matter how strong logic is. The President's authority under section 232 is broad and historically the courts and Congress have been reluctant to challenge national security decisions.

Gary Hufbauer, a senior nonresident researcher at the Peterson Institute of International Economics, said the World Trade Organization had also been reluctant to challenge any trade policy claimed for reasons of national security.

As a result, "from President Trump's point of view, the use of this section has been very interesting," he says.

Prior to this administration, the law was rarely invoked. The use by the section president has raised eyebrows in Congress, and an ongoing court challenge says the law gives the president too much leeway.

Hufbauer notes that Article 232 is a law of the Cold War era.

"In wartime, Congress gives a lot of power to the president," he said. "Right now, when things are completely different and when we talk about … trade with allies, it's very strange."

When "buying American" is not an option

Trump has repeatedly defended his trade policies by claiming that tariffs can be avoided by helping US manufacturers. But while auto tariffs would target imports, US firms would inevitably suffer the consequences.

"There is no American vehicle," says Wilson of the Motor and Equipment Manufacturers Association. "All the vehicles you buy in the United States … depend on a dynamic global market."

Cars are made of thousands of pieces from around the world. In some cases, coins cross borders repeatedly.

Consider the seat in a new American-made vehicle. Inside this seat is an electronic sensor – manufactured by a foreign manufacturer, explains Wilson.

The sensors will be imported to the United States and programmed. "Then, once programmed, they are often sent abroad, to be integrated into a larger component," says Wilson. "Then they are brought back to the United States to be part of that seat."

All of this happens before the seat reaches a car factory. Multiply that by the multitude of parts inside a car, and even the most American vehicle has been hit by parts makers around the world.

As a result, tariffs would increase costs for US manufacturers as well as for their foreign competitors. And in the end, the costs could be passed on to consumers.

The precise impact depends on how the tariffs would be taxed and countries likely to benefit from exemptions. An analysis by the Center for Automotive Research found that very narrow tariffs would only increase the price of cars by a few hundred dollars, while an extended tariff would increase the price of cars by several thousand dollars: Prices of imported cars could rise by $ 3,700 and cars manufactured in the United States rise to $ 1,900.

Car manufacturers have already been affected by existing tariffs, such as tariffs on steel and aluminum under Article 232 and the range of duties applied to Chinese products. .

But industry leaders say the specter of auto-specific tariffs is much more worrying.

"The potential [of] tariffs over 25% on vehicles would give steel and aluminum prices a really reduced appearance, "said Schwietert, of the Auto Alliance.