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Tariffs, NAFTA hang over auto industry

Tuesday, June 19, 2018 - 07:00
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Trade associations representing auto manufacturers, suppliers, and aftermarket businesses testified before Congress in May to oppose new tariffs on steel, aluminum, and goods imported from China. According to the associations, the tariffs – which are designed to address trade imbalances and increase onshore manufacturing – could potentially raise consumer prices and lead to domestic job cuts.

At the same time, ongoing negotiations with Mexico and Canada could lead to significant changes to the NAFTA free trade agreement, which would directly impact the automotive parts supply chain.

“We are seeing an administration that is committed to revamping our trade and the way we operate on trade as a country,” says Ann Wilson, senior vice president of government affairs for the Motor & Equipment Manufacturers Association (MEMA), which opposes the tariffs. “This is going to impact our members who have a global footprint, or who have customers with a global footprint, as well as those who manufacture domestically but depend on suppliers with a global footprint.”

The Trump administration has already imposed one set of tariffs: the Section 232 tariffs on steel and aluminum imports. A number of countries have been given exemptions. In the case of the European Union, Canada and Mexico, those exemptions are temporary and pending further trade negotiations. Other countries, like South Korea, have negotiated permanent exemptions while agreeing to quotas on exports.

The proposed Section 301 tariffs, on the other hand, target a still-growing list of products imported from China. Those tariffs were spurred, in part, by a combination of the growing trade deficit with China, theft of intellectual property in China as a result of technology transfer requirements, and China’s dumping of steel in the global market.

“I very much appreciate the Trump Administration[‘s] … efforts to push back against unfair Chinese trade practices by placing tariffs on products that receive substantial benefit from illegal technology transfers or the Chinese government’s manipulation of commerce,” said U.S. Senator Lindsey Graham (R-South Carolina). “It is not too much to ask for China to stop stealing intellectual property and open up their markets that are closed due to heavy-handed Chinese government barriers to foreign business enterprises.”

U.S. automakers and parts suppliers oppose both sets of tariffs, because they will negatively affect their complex international supply chains.

Response in other industries has been mixed. Raw material suppliers like those in the U.S. steel and aluminum, textile, and fishing industries support the tariffs, while heavy finished goods importers like retailers, oil and gas companies, manufacturers, etc. have opposed them.

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