Automakers to Trump: Tariffs will drive up auto prices and cost thousands of jobs

President Donald Trump talks with auto industry leaders, including General Motors CEO Mary Barra (L) and United Auto Workers (UAW) President Dennis Williams (R) at the American Center for Mobility in Ypsilanti Township, Michigan, U.S. March 15, 2017.

Jonathan Ernst | Reuters
President Donald Trump talks with auto industry leaders, including General Motors CEO Mary Barra (L) and United Auto Workers (UAW) President Dennis Williams (R) at the American Center for Mobility in Ypsilanti Township, Michigan, U.S. March 15, 2017.

With President Donald Trump threatening hefty tariffs on foreign-made cars and SUVs imported into the U.S., automakers are warning him it would cost consumers thousands of dollars and ultimately lead to job cuts.

The Alliance of Automobile Manufacturers, a trade group representing domestic and foreign automakers with plants in the U.S., predicts the average price of a new vehicle will increase $5,800 if the president imposes a 25 percent tariff on imported models. That would amount to a $45 billion tax on the auto industry according to the trade group.

“Tariffs will lead to increased producer costs, increased producer costs will lead to increased vehicle costs, increased vehicle costs will lead to fewer sales and less tax receipts, fewer sales will lead to fewer jobs, and those fewer jobs will significantly impact many communities and families across the country,” the Alliance of Automobile Manufacturers warned in a letter to the U.S. Commerce Department.

The Commerce Department is conducting an investigation into whether auto-related imports are a threat to national security. If they are deemed a threat, it would give Trump the justification he needs to impose tariffs on imported autos.

Last week, the president threatened to tax European-made autos if the European Union does not drop tariffs that group has imposed on certain U.S.-made products including bourbon and motorcycles.

Trump tweeted, “Based on the Tariffs and Trade Barriers long placed on the U.S. and it great companies and workers by the European Union, if these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20 percent tariff on all of their cars coming into the U.S. Build them here!”

Auto executives have been lobbying the Trump administration for months to avoid starting a trade war. Despite meetings at the White House with President Trump and his top advisors, leaders in the industry are struggling to get move the Trump administration away from imposing tariffs.

In their letter to the Commerce Department, automakers warn, “A 25-percent tariff on imported vehicles and vehicle components would result in a 1.5 percent decline in production and cause 195,000 U.S. workers to lose jobs over a 1- to 3-year period or possibly longer, according to the Peterson Institute for International Economics. Their analysis estimates that if other countries retaliate with tariffs, then American job losses would likely increase to 624,000.”

In addition to job cuts and lower sales, automakers believe a trade war will ultimately weigh on profits and hurt the industry’s ability to develop autonomous and electric vehicles.

The Commerce Department’s Investigation into auto imports, which began in late May, is expected to take several months.

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