Alliance Comments on Senate Finance Committee Hearing on Impact of Tariffs on the U.S. Automotive Industry

Sep
27

Chairman Hatch and Ranking Member Wyden,

On behalf of the Alliance of Automobile Manufacturers, I would like to thank you for holding a hearing on the potentially staggering implications of the Administration’s on-going 232 investigation concerning automobiles and auto parts. The Alliance is a trade association representing 12 automakers based both domestically and internationally. Combined, Alliance members represent approximately 70% of new car sales in the United States.

The automotive sector continues to be one of the most powerful engines driving our economy. Automakers based in Detroit and around the world operate 45 assembly plants in fourteen states, relying on suppliers from virtually every state in the nation. Our industry employs more than 7 million people generating $500 billion annually in paychecks, contributes 3.5% to our total GDP, and invests over $20 billion annually in research and development here in the United States.

Despite the powerful economic impact our industry has on the U.S. economy, we are facing an unprecedented 232 investigation by the Commerce Department that may lead to the imposition of auto tariffs as high as 25%. These tariffs would be applied under the unsubstantiated premise that autos threaten national security. The strong outpouring of opposition during the 232 public hearing reflects a broadly held view that tariffs would both harm consumers and jeopardize America’s leadership in automotive innovation.

The numbers are hard to ignore. According to a recent Center for Automotive Research analysis, a 25% tariff would drive up costs as much as $7,000 per imported vehicle and more than $2,000 on a domestically built car. The financial burden will not just be felt by new car buyers. By forcing families out of the new car market, tariffs will drive up demand for used cars, resulting in higher prices. Finally, tariffs on imported auto parts will jack up repair and maintenance costs. Put simply, the auto tariffs represent a new and massive tax increase on consumers no matter what they drive. And then, predictably, retaliation will add new costs outside of the auto sector and undermine the strength of our economy

Higher prices from tariffs will lead to a destructive spiral.  As costs rise, demand drops.  Some say 2 million units are at risk. And that means fewer Americans will be working to produce, sell, and service these vehicles. The Peterson Institute found that if these tariffs were implemented American job losses would be about 200,000 – and this number could rise above 600,000 with the retaliatory tariffs that will follow the implementation. Other studies indicate the job losses will be even more severe.  Attached is Alliance testimony that details potential state-by-state impact.

Rather than harming U.S. consumers and creating a system where U.S.-based plants see job losses, we continue to encourage the Administration to strengthen the U.S. economy by modernizing NAFTA, concluding a U.S.-EU trade pact, and expanding market access for U.S. auto exports. We look forward to working with both the Administration and Congress to strengthen our trade agreements and grow American jobs.

Sincerely,

Mitch Bainwol
President & CEO
Alliance of Automobile Manufacturers