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US car trade groups warn against tariffs

Imposing them would cost hundreds of thousands of jobs, threaten industry spending on self-driving cars

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A coalition representing major foreign carmakers says that the tariffs will harm carmakers and US consumers.

Washington

TWO major car trade groups on Wednesday warned the Trump administration that imposing up to 25 per cent tariffs on imported vehicles would cost hundreds of thousands of jobs in the sector, dramatically hike prices on vehicles and threaten industry spending on self-driving cars.

A coalition representing major foreign carmakers including Toyota Motor Corp, Volkswagen AG, BMW AG and Hyundai Motor Co, said that the tariffs would harm carmakers and US consumers. The administration in May launched an investigation into whether imported vehicles pose a national security threat, and President Donald Trump has repeatedly threatened to quickly impose tariffs.

"The greatest threat to the US automotive industry at this time is the possibility the administration will impose duties on imports in connection with this investigation," wrote the Association of Global Automakers representing major foreign carmakers. "Such duties would raise prices for American consumers, limit their choices, and suppress sales and US production of vehicles."

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The group added: "Rather than creating jobs, these tariffs would result in the loss of hundreds of thousands of American jobs producing and selling cars, SUVs, trucks and auto parts."

Last Friday, Mr Trump threatened to impose a 20 per cent tariff on all imports of EU-assembled cars. On Tuesday, Mr Trump said that tariffs are coming soon. "We are finishing our study of Tariffs on cars from the EU in that they have long taken advantage of the US in the form of Trade Barriers and Tariffs. In the end it will all even out - and it won't take very long!" Mr Trump tweeted.

The Alliance of Automobile Manufacturers, representing General Motors Co, Ford Motor Co, Daimler AG, Toyota and others, urged the administration in separate comments filed on Wednesday not to go forward.

"We believe the resulting impact of tariffs on imported vehicles and vehicle components will ultimately harm US economic security and weaken our national security," the group wrote, calling the tariffs a "mistake" and adding that imposing them "could very well set a dangerous precedent that other nations could use to protect their local market from foreign competition".

The Alliance said that its analysis of 2017 car sales data showed that a 25 per cent tariff on imported vehicles would result in an average price increase of US$5,800, which would boost costs to American consumers by nearly US$45 billion annually.

Carmakers are concerned that tariffs would mean less capital to spend on self-driving cars and electric vehicles. "We are already in the midst of an intense global race to lead on electrification and automation. The increased costs associated with the proposed tariffs may result in diminishing the US's competitiveness in developing these advanced technologies," the Alliance wrote.

Toyota said in a statement on Wednesday that new tariffs "would increase the cost of every vehicle sold in the country". The carmaker said that the tariffs would mean even a Toyota Camry built in Kentucky "would face US$1,800 in increased costs".

Both automotive trade groups cited a study by the Peterson Institute for International Economics that the cost to US jobs from the import duties would be 195,000 jobs, and could be as high as 624,000 jobs if other countries retaliate.

The German Association for Small and Medium-sized Businesses said that the "pattern of rising protectionism is very likely to continue if the US decide to impose tariffs on foreign automobiles and automobile parts, thus causing tremendous damage to both economies".

Alabama governor Kay Ivey, a state that produced nearly one million vehicles and 1.7 million engines built by foreign carmakers last year, urged the Commerce Department not to invoke the tariffs. She said that job losses from new levies could be "devastating".

The proposed tariffs on national security grounds have been met by opposition among many Republicans in Congress.

Mr Trump has made the tariffs a key part of his economic message and repeatedly lamented the US car sector trade deficit, particularly with Germany and Japan. Some aides have suggested that the effort is a way to try to pressure Canada and Mexico into making more concessions in ongoing talks to renegotiate the North American Free Trade Agreement (Nafta).

US Commerce Secretary Wilbur Ross said on Thursday that the department aimed to wrap up the probe by late July or August. The Commerce Department plans to hold two days of public comments in July on its investigation of car imports.

The Commerce Department has asked if it should consider US-owned car manufacturers differently than foreign carmakers.

The Association of Global Automakers rejected that contention, saying that its members' American workers "are no less patriotic or willing to serve their country in a time of crisis than any other Americans".

The group questioned national security as grounds to restrict car imports. "America does not go to war in a Ford Fiesta," they added.

The Alliance said that "there is no basis to claim that auto-related imports are a threat to national security", and noted that 98 per cent of US car imports came from US national security allies. REUTERS