Published
October 31, 2019
As Rich Valenstein sees it, there’s an uncomfortable truth about looming auto tariffs. He says that the so-called Section 232 auto tariffs proposed by the Trump administration could add $4,400 to the cost of each and every car sold in the United States.
“Tariffs are taxes, plain and simple,” says Valenstein, group vice president of Toyota Motor North America. “Immediately when tariffs would be passed, that would directly increase the production cost for every auto manufacturer.”
The situation for imports is even more dire where tariffs could add, on average, $6,875 for all imported autos, according to a study from the Center of Automotive Research (CAR). If such a sudden spike in prices were to occur at local car dealerships, it’s easy to predict what happens next: less sales and lower demand.
“Those production costs will ultimately get passed onto consumers, dealers and suppliers,” Valenstein says. “Those higher prices are going to result in lower demand, and that lower demand will then, ultimately, result in fewer jobs.”
It’s trickier to predict some far-reaching secondhand effects, but some studies predict ominous results, including job losses in the hundreds of thousands. If there is diplomatic trade retaliation (and there usually is in trade disputes, with the other country imposing tariffs on the goods it imports), the auto tariffs alone could result in the loss of 624,000 jobs, according to a study from the Peterson Institute for International Economics. CAR estimates similar job losses ranging from 82,000 to nearly 715,000 jobs and a $6.4 billion to $62.2 billion hit to U.S. GDP.
And those job losses would tend to cluster in manufacturing hubs, Valenstein says.
“Those jobs are going to be centered where automotive plants are,” Valenstein says. “A lot of those are in the heartland of America. This would impact certain communities disproportionately.”
Even foreign car companies that don’t have major manufacturing centers in the U.S. would be affected. Chris Marchand, vice president of government and industry relations, Americas, for Jaguar Land Rover, says that despite the company not having a large manufacturing base in the U.S., jobs would still take a hit.
“Any potential tariffs would have a detrimental effect on our business.” Marchand says. “You have the knock-on effect — whether it’s our headquarter business in New Jersey or our dealers, to our Port operations around the country and even, for example, down to truckers that move our vehicles – a slower sales rate does not bode good things, it typically means you’d have to restructure your operations in some way.”
As to how companies would react, it’s hard to know precisely.
“It’s hard to say how different manufacturers would respond,” Valenstein says. “With those types of significant price increases, Americans will be able to afford less… How that impacts different companies to try to sustain those operations will have to play out, probably in some negative way.”
But it doesn’t have to end in higher prices and job losses. Earlier this year, President Donald Trump said he would delay a decision on 232 auto tariffs, likely meaning the administration will make a final decision in November. And in the meantime, there are solutions at hand. First and foremost, deciding not to implement the auto tariffs.
“What I hope doesn’t happen, is implementing these tariffs,” Marchand says. “If these tariffs are implemented, countless numbers of jobs will be put at risk, which is counterintuitive to the administration’s goal to grow jobs.”
Valenstein agrees and urged the administration to rethink the auto tariffs.
“We at Toyota would encourage the administration to provide much-needed certainty to the U.S. auto industry,” Valenstein says. “We would urge the elimination of this threat of auto tariffs under the Department of Commerce 232 investigation.”
About the authors
Thaddeus Swanek
Thaddeus is a senior writer and editor with the U.S. Chamber of Commerce's strategic communications team.
