SEMA eNews Vol. 22, No. 7, February 14, 2019

Will a 25% Tariff Be Imposed on Imported Auto Parts?

By Washington, D.C., Staff

The U.S. Department of Commerce (DOC) has until February 17 to issue a report on whether imported automobiles and auto parts pose a threat to U.S. national security. Last May, President Trump directed the DOC to pursue the investigation which applies to all types of cars and parts, including new cars, classic cars, OEM parts and specialty auto parts. Global tariffs of as much as 20% to 25% could be imposed, in part to gain leverage as the United States pursues trade negotiations with the European Union, Japan, China and other countries.  Once the DOC has issued a report, the president has 90 days to decide what actions to take, if any.

Last year eight major trade associations formed the “Driving American Jobs” Coalition to oppose the potential tariffs. The group includes SEMA and represents the broad scope of the auto industry, from automakers and dealers to parts manufacturers, distributors, retailers and service providers. The Coalition has sought to convince the Trump Administration not to impose tariffs.

President Trump is using Section 232 of U.S. trade law, which delegates authority from Congress to the executive branch to put tariffs or quotas on imports that “threaten to impair” U.S. national security. Section 232 has generally been applied on a limited basis, targeting a few product lines. However, the current administration has used Section 232 more broadly—imposing sweeping 25% tariffs on foreign steel, 10% tariffs on imported aluminum, and threatening tariffs on auto imports. Legislation has been introduced that would require the U.S. Congress to approve or disapprove of imposing tariffs. SEMA supports the legislation to provide checks and balances when considering issues impacting the national interest.

If the DOC report concludes that imported automobiles or auto parts pose a threat, President Trump would have several options. They range from imposing global tariffs on all finished vehicles and parts to selectively imposing tariffs on products from certain countries. 

Domestic industries usually support tariffs but in this instance the auto industry is generally united in opposition. The reason may be that most companies now rely on a global supply chain and rules-based international trading system. While SEMA supports the Trump Administration’s efforts to ensure fair trade, tariffs threaten to disrupt the marketplace and impose an unanticipated tax on U.S. businesses.

SEMA has recommended other trade law mechanisms be employed first, such as filing product dumping and foreign subsidy action and working more closely with our international trading partners to contest unfair trade practices. 

For more information, contact Stuart Gosswein at stuartg@sema.org.

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