‘Trump’s threat to tax car import might jeopardize US jobs’
President Donald Trump repeating his threat after leaving the G7 Summit in Canada, to tax car import by 25%, might jeopardize more than 150.000 jobs in America, experts in the US say. One third of all car import is done by the big three – GM, Ford and Chrysler – producing in Canada and Mexico. Most European and Japanese car makers envisioned produce in the US too.
In 2017 some 17,2 million cars were sold in the US, according to AutoData, of which 8,7 million imported, completes the Center For Automotive Research, mostly from Mexico, Canada and Japan.
Trump wants to use the argument of ‘national security’, like he did to tax import of steel and aluminum, to do the same for cars. The Republican chairman of the Finance Commission in Congress, Jeb Hensarling, does not agree.
“The Honda Accord is no threat to our national security, but taxing it with import tariffs would be a threat to the economical security of millions of hard-working American families”, he argues.
International consulting firm Trade Partnership Worldwide estimates an import tax of 25% on cars could create 92.000 jobs in industry, but cause the loss of 250.000 jobs in the rest of the economy. Today some 1 million Americans are working in the car industry at manufacturers and suppliers, compared to 660.000 in 2010, according to the Bureau of Labor Statistics.
One third produced in Mexico and Canada
Expert Kristin Dziczek of the Center for Automotive Research in Michigan points out that one-third (14,5%) of the 44% of cars that were imported last year into the US are produced by GM, Ford and Chrysler in Canada and Mexico.
Two partners of the North American Free Trade Agreement (NAFTA), that represent more than half of the 4,27 million cars imported in the US, while import form other countries like Japan represents 21%, compared to 11% for Germany and 8% for South Korea.
Force breakthrough in NAFTA
Some analysts, like Ed Mills from financial consultancy firm Raymond James, are convinced Trump’s menace is merely meant to force a breakthrough in the re-negotiation of NAFTA with Canada and Mexico, and where future taxes on car import – non-existent today – are one of the blocking issues.
Joe Hinrichs, responsible for production at Ford warns that the ‘ramifications‘ of such a tax, intentionally or not, could be important. “We sell regionally, but we compete internationally”, he says.
Ford Focus built in China
Ford eventually wanted to bring back the production of the Focus to the US under pressure by Donald Trump, but decided to move it to China, due to the high costs of primary materials like steel and aluminum that are targeted by the new taxes from the White House.
The majority of the other car producing countries threatened by Trump have production facilities in the US itself. Nevertheless, the number of cars produced and sold in the US has dropped this year from 51,1% compared to 50,1 % in the same period in 2017.
Ford (80%), GM (60%) and Fiat-Chrysler (55%) are producing the majority of the cars sold in the US locally. Honda is the only foreign one to to do the same with 65% of cars sold in the US. The other brands import significantly more than what they produce in the US: Volkswagen 82%, Toyota 55%, Hyundai 57%, Mercedes-Benz 70%, BMW 68% and Audi and Porsche even 100%.
On the other hand German car maker BMW has its biggest production plant worldwide in Spartanburg (South Carolina), building the more expensive SUV models, like the X5. 70% of its production is exported worldwide, worth 10 billion dollar. BMW claims to have built more cars in the US (371.284) last year than it imported, selling 305,685 cars in America.