Is your car a national security risk? Veronique de Rugy writes:
Section 232 of the Trade Expansion Act of 1962 gives the president unilateral authority to impose tariffs or quotas on imports that “threaten to impair” U.S. national security. In a still-undisclosed-to-the-
public report sent to the administration on Sunday, many suspect that Commerce contends imported foreign cars and parts represent just such a threat. If that’s the case, it would give the president power to impose restrictions on them, such as a 25 percent tariff. He has up to 90 days to announce his decision and another 180 days to negotiate remedies with trade partners. If Trump imposes these trade restrictions, it will make producing and purchasing every single new automobile in America more expensive. Yes, I mean all automobiles, not just imports. That’s because, while car brands can be national (e.g., Toyota is Japanese, Mini is German, Ford is American), in reality they are global automakers using global sources for their parts.
Many “foreign” automakers produce and assemble cars in the United States and then export them to the rest of the world. The same is true for “American” automakers who have both domestic and international locations from which they produce for export and domestic consumption. No automobile is made with 100 percent of its parts from one county. For instance, Tesla—which is unique in that it produces all of its vehicles in the United States—imports half of the parts it uses.
Looking at the percentage of each vehicle’s parts and manufacturing that comes from either the United States or Canada as tracked by U.S. regulators, CNN Money reported that “the two most ‘American’ cars are both Hondas—the Odyssey minivan and Ridgeline pickup. Three-quarters of each vehicle’s components are made in the United States or Canada.”
In other words, no automakers—not even G.M. or Ford—will be safe from these tariffs. All manufacturers will suffer rising costs, much of which will be shifted onto consumers via higher prices.
A new study from the Center for Automotive Research estimates that import restrictions would increase new-car prices by $455 to $6,875, depending on the approach the administration takes. These higher prices would reduce annual consumer demand by 493,600 to 2 million vehicles. But that’s before other countries retaliate with their own tariffs and quotas.
[Veronique de Rugy, “Trump’s Tariffs May Classify Imported Cars as National Security Risks,” Reason, February 21]
