25% Tariff: What You Need to Know

The Fight to Tax Automotive Imports

March of 2018 marked the commencement of the Trump administration’s tariff implementations. Trailed with controversy, Trump and Commerce followed through with early promises and enacted a 25% tariff on steel imports. Additionally, the administration enforced a 10% tariff on aluminum. Much to the outrage of automotive suppliers and manufacturers across the world, the current US administration is proposing another 25% tariff on imported vehicles and auto parts. The reason? Trump claims the tariff will prompt manufacturing operations to move production onto American soil. Major automotive and political figures however, disagree.

What the Automotive Industry Predicts

Lined with challenges, tariff implementations have a history of adversity. In the day and age of fearless expression, President Trump and supporters have had difficulty enacting what many see as controversial practices. Figures from powerful institutions such as the Alliance of Automobile Manufacturers (AAM) and the Institute for International Economics (IIE) have all spoken to the dangers of the imposed tariff. According to the IIE, “production within the States relies heavily on foreign parts and components.” As a result, “Trump’s tariff would have a significant impact on prices of cars assembled in the U.S.” The AAM chimed in as well, calculating the tariff to increase the price of an imported car by $6,000 and the price of an American-produced vehicle by at least $2,000. Figures computed by the National Automobile Dealers Association (NADA) project the American-produced car to increase by $4,400 and eliminate a staggering 700,000 jobs. The 25% tariff on imported auto parts and vehicles is estimated to cost Americans $83 billion (NBC).

What Trump Predicts

With opposition towards the tariff multiplying, President Trump has time and time again attempted to reassure the public. Claiming that the high tax will result in manufacturers moving operations to the US, his efforts and string of tweets have failed to restore faith in the automotive industry. Institutions such as the AAM and NADA remain concerned over the basis of success for the tariff. According to chief economist Mark Zandi, the only way for the tariff to have the result Trump predicts is if other countries don’t retaliate. He claims, “faced with no retaliation, the 25% tariff would increase the United States economy by .04% a year, add 23,000 jobs and would increase domestic automobile production by 300,000. However, if countries were to retaliate, the US GDP would decline and jobs will be lost. (nytimes)”

How Trump is Imposing the New Tariff

The Trade Expansion Act of 1962 has become the primary drive behind the Trump administration recent tariff frenzy. Section 232 of the act states that if an import is named a national security threat, the President may apply restrictions. Once the president makes the claim, the selected import is immediately placed under investigation. Commerce then has 270 days to determine if the product is a threat. If it is not, no further action is required. However, if Commerce discovers a risk, the department must make a recommendation as to how to respond. Following, the president determines what course of action to take. He then has 15 days to notify Congress of his final decision (fas). Suggested by current Secretary of Commerce Wilbur Ross, this clause was backing to the recent steel and aluminum tariff. This however, marks the second time the US government placed imports of steel under investigation. In 2001, under Secretary of Commerce Donald L. Evans, iron ore, steel, and many others imports were called under fire (federalregister). The investigation soon came to a close with Commerce determining the selected imports were not a threat to national security.

In Conclusion

In a country filled with strong opinions, President Trump and his tariff implementations have faced a variety of political hurdles. Beginning with a troubled road for steel and aluminum, Trump’s imported vehicles and auto parts tariff seems to be the hardest one yet. Additionally, Wilber Ross is now calling for Trump to name another investigation on uranium imports. With heavy opposition from powerful automotive institutions, the controversial president has his work cut out for him.

About Insequence Corporation

Insequence is a leading provider of sequencing, manufacturing, and logistic software solutions. Easily tailored, their software’s modular design can fulfill requirements no matter the size or complexity of the system. With OEM experience throughout the Americas and Europe, Insequence remains an important and knowledgeable figure in the automotive world. With software available for a wide variety of manufacturers and suppliers, the Smyrna based company has years of experience with the intricate nature of the industry. Along with over 20 standard OEM interfaces and 24  x 7 x 365 customer support, Insequence is at the forefront of supply chain software solution providers.