Auto tariffs are bad idea

Published on Monday, 11 March 2019 20:23
Written by Bloomberg

Evidently, President Donald Trump is still toying with the idea of imposing steep tariffs on cars and automotive parts. In a White House brimming with bad economic ideas, this would be the worst one yet.

Last month, the Commerce Department completed a confidential report on the national-security implications of auto imports. If the probe uncovered a threat of some kind, real or imagined, the president would have wide latitude under the law to restrict or limit imports in response.

Trump has mused about imposing duties of 25 percent to induce the European Union to make trade concessions.

This would be as foolish as it sounds. A tariff of that size would be a tax increase of perhaps $80 billion on the U.S. economy. It would sharply increase prices, reduce growth, impede investment, cost American jobs, infuriate allies, invite painful retaliation and undermine the system of global trade.

The U.S. auto industry has united in opposition to the idea, because it would harm the very industry it’s supposed to protect. America’s automakers rely on imported parts that aren’t produced or easily available domestically. If a 25 percent tariff were imposed, costs would rise and sales would plunge by perhaps 2 million cars a year. According to one analysis, the industry’s production could fall by 1.5 percent and 195,000 American jobs would be at risk. Retaliation by trade partners might triple that tally. Consumers, too, would feel the pain. On average, the price of imported cars could rise by nearly $6,000 and domestic cars could go up by $2,000.

Careful targeting of any new tariffs could reduce these costs somewhat, but even then the overall effect isn’t in doubt. Recent history offers plenty of examples: Both George W. Bush’s steel duties and Barack Obama’s tire tariffs helped the industries they targeted only modestly, while doing significant damage to the broader economy.

“I happen to like tariffs,” Trump said recently, as if that’s all one needs to know. Actually, in a way, it is.

-Bloomberg Opinion



Posted in New Britain Herald, Editorials on Monday, 11 March 2019 20:23. Updated: Monday, 11 March 2019 20:25.