Industry News: U.S. Is Planning To Hold Back On Issuing Car Tariffs

[William Maley]

Back i n May, the U.S. Commerce Department launched an investigation into car imports to determine the impact of car imports. The investigation falls under Section 232 of the Trade Expansion Act of 1962 which states "whether imports of automobiles, including SUVs, vans and light trucks, and automotive parts into the United States threaten to impair the national security." This could allow the Trump administration to levy tariffs as high as 25 percent on foreign-built vehicles.

Yesterday, the Commerce Department submitted their draft report into the investigation. The Trump administration has 90 days to determine whether or not to move forward on various measures such as implementing tariffs if the report concludes that imports are a security threat. But Bloomberg is reporting that the administration is holding off on imposing new tariffs. Two sources tell the publication that top officials are considering revising plans due to the report. The sources also said that the report "would be subject to further changes."

President Trump has been using the threat of tariffs as leverage during negotiations with trade partners. Already, Trump has promised not to impose any auto tariffs on Europe while the two work on a new trade deal. But a number of foreign governments and companies have said the tariffs would cause more harm. The National Automobile Dealers Association estimates tariffs would add $2,270 to the cost of U.S.-built vehicles and $6,875 to the cost of imported vehicles.

It doesn't help that many in Trump's senior economic team believe slapping tariffs on imported cars is a bad idea. According to a report from Axios yesterday, "about every member of his senior economic team besides Peter Navarro believes this is a terrible idea."

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[David]

Hopefully Potus 45 will listen for once to the smarter people on his economic team. Tariffs are a bad idea.

[ccap41]

I'm for them if we're being charged them. I'm for whatever is most fair. None of the one-sided BS. 

[Drew Dowdell]

4 minutes ago, ccap41 said:

I'm for them if we're being charged them. I'm for whatever is most fair. None of the one-sided BS. 

What do you mean... "being charged for them"?

[ccap41]

If US companies are charged to sell to X country, I believe it is fair to then charge X country's companies to sell their products here. 

[A Horse With No Name]

9 minutes ago, ccap41 said:

If US companies are charged to sell to X country, I believe it is fair to then charge X country's companies to sell their products here. 

Could not agree more. Don't like the current administration in the least but like Chinese intellectual property theft even less.

[Drew Dowdell]

13 minutes ago, ccap41 said:

If US companies are charged to sell to X country, I believe it is fair to then charge X country's companies to sell their products here. 

It's the customers who are charged in the end. 

But China now charges a 15% tariff on imported cars.

The US charges a 25% tariff on imported trucks and has since the Kennedy Administration. 

Edit: Furthermore, it's not like there is some huge flood of Chinese cars in the US market. Two of the three models that were sold here have already been pulled from US sales (CT6 PHEV and S60 Inscription). 

Japan doesn't have a tariff on imported cars, and S. Korea's is fairly low.

That's why a 25% tariff on cars imported into the U.S. from these countries doesn't make sense even from a retaliatory perspective. 

[ccap41]

Personally, I don't care who or when. Point fingers at whoever you'd like. I just want it even for both parties. Charge 100% tariffs, charge 0% tariffs. Whatever it is, just be equal. 

[Drew Dowdell]

3 minutes ago, ccap41 said:

Personally, I don't care who or when. Point fingers at whoever you'd like. I just want it even for both parties. Charge 100% tariffs, charge 0% tariffs. Whatever it is, just be equal. 

But that's why this 25% thing that Trump is going for makes no sense.  I agree with you that tariffs should be reciprocal... but that's not what he's doing. 25% on Japanese cars when they charge 0%? 

It's hamfisted.  Had he come out with reciprocal tariffs, I think he would have gotten a lot more traction and agreements.

[A Horse With No Name]

25 minutes ago, Drew Dowdell said:

But that's why this 25% thing that Trump is going for makes no sense.  I agree with you that tariffs should be reciprocal... but that's not what he's doing. 25% on Japanese cars when they charge 0%? 

It's hamfisted.  Had he come out with reciprocal tariffs, I think he would have gotten a lot more traction and agreements.

The idea is good, the implementation is terrible. 

[daves87rs]

It ain’t going to be the cars you should worry about guys-it’s the parts!

Repair will go through the roof......

[regfootball]

We don't benefit from a future where a majority of our cars come from China, like so many other products.  And over time that will likely be inevitable.  If we get to that point where 3/4 of all our cars are coming from Mexico and China, is what we want to avoid.  What that means for an effective tariff setup back and forth, I don't know.  I do know the 25% number is bantered about and maybe that is just put out there to believe at some point in the future it will settle in at 10-15%.  I don't know.

We do really have to ask the question, why does GM need to make something like the Envision in China, and ship it over, or why do they have to make pickups that sticker for 60k in Mexico.

[A Horse With No Name]

6 hours ago, daves87rs said:

It ain’t going to be the cars you should worry about guys-it’s the parts!

Repair will go through the roof......

The whole thing is designed to work like that. It moves the tax burden to the working classes. 

6 hours ago, regfootball said:

 

We do really have to ask the question, why does GM need to make something like the Envision in China, and ship it over, or why do they have to make pickups that sticker for 60k in Mexico.

Agreed. 

[daves87rs]

8 hours ago, regfootball said:

We don't benefit from a future where a majority of our cars come from China, like so many other products.  And over time that will likely be inevitable.  If we get to that point where 3/4 of all our cars are coming from Mexico and China, is what we want to avoid.  What that means for an effective tariff setup back and forth, I don't know.  I do know the 25% number is bantered about and maybe that is just put out there to believe at some point in the future it will settle in at 10-15%.  I don't know.

We do really have to ask the question, why does GM need to make something like the Envision in China, and ship it over, or why do they have to make pickups that sticker for 60k in Mexico.

Siimple answer-Wall Street-

Make a major profit or die......

[riviera74]

12 hours ago, regfootball said:

We don't benefit from a future where a majority of our cars come from China, like so many other products.  And over time that will likely be inevitable.  If we get to that point where 3/4 of all our cars are coming from Mexico and China, is what we want to avoid.  What that means for an effective tariff setup back and forth, I don't know.  I do know the 25% number is bantered about and maybe that is just put out there to believe at some point in the future it will settle in at 10-15%.  I don't know.

We do really have to ask the question, why does GM need to make something like the Envision in China, and ship it over, or why do they have to make pickups that sticker for 60k in Mexico.

GM makes the Envision in China because for every Buick that sells here, four are sold in China.  The Encore is already made in South Korea (the former Daewoo plants are now owned by GM); GM has them shipped to China or here in NA.  Whether it is parts or final assembly, the era where GM or Ford or FCA make virtually everything in the USA is long gone.  Supply chains are global and automakers are exploiting that.  If you want your next Chevy Trax to have MSRP to rival a Cadillac XT4, then the president should seek to have insanely high tariffs on cars AND car parts.  Consumers automatically lose when that happens.

IOW, tariffs are still bad.  New car prices are quite high as they are.

[A Horse With No Name]

11 minutes ago, riviera74 said:

GM makes the Envision in China because for every Buick that sells here, four are sold in China.  The Encore is already made in South Korea (the former Daewoo plants are now owned by GM); GM has them shipped to China or here in NA.  Whether it is parts or final assembly, the era where GM or Ford or FCA make virtually everything in the USA is long gone.  Supply chains are global and automakers are exploiting that.  If you want your next Chevy Trax to have MSRP to rival a Cadillac XT4, then the president should seek to have insanely high tariffs on cars AND car parts.  Consumers automatically lose when that happens.

IOW, tariffs are still bad.  New car prices are quite high as they are.

Quoted in its entirety for truth. 

[regfootball]

part of the reason for low Envision sales is a price that does not mate up to the perceived public value.  With a better price (and not a 2012 design), it would have more volume.  The Encore makes more sense to bring from Korea because it is higher volume and exploiting cheaper wages there helps keep a small car sell for a small price in the US.

I'd buy that logic 100% fully if it were just the Envision we were talking about here, but we all know they could produce this in an Equinox / Terrain plant if they wanted to, with the 45k sticker prices and such.  We also know the real intent of this was to be a big trojan horse to gain acceptance to producing GM cars in China and bringing them back here.  Its the first step towards GM producing 3/4 of their sales volume of the US outside the US, which is really unacceptable for a company that was kept alive by our own government, when Honda and Subaru etc seem to make a high percentage of the cars they sell in the US, here.

 

Edited November 17, 2018 by regfootball

[frogger]

South Korea does not have low wages in the auto mfg industry.