Tariffs’ Impact on the Automotive Industry Takes Center Stage During Senate Finance Committee Hearing

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The Senate Finance Committee hosted a hearing on the impact of tariffs on the automotive industry Wednesday morning.

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The Department of Commerce self-initiated a Section 232 investigation of automobiles and automotive parts back in May.

“In short, the U.S. auto industry is a major driver of the U.S. economy, supporting approximately 10 million American jobs and accounting for 3 percent of our GDP,” Finance Committee Chairman Orrin Hatch (R-Utah) said during opening remarks. “Without question, any tariffs that are imposed will have a negative impact on the U.S. auto industry and our economy. Our focus should be on building on the benefits from our historic tax reform achievement earlier this Congress.

“Our trade policy should strengthen our relationships with our allies while targeting China’s most harmful trade practices. Tariffs on autos and auto parts are not going to help us achieve any of these things.”

Ranking Member Ron Wyden (D-Oregon) was also critical of a tariff-based approach.

“Furthermore, the president’s threats to impose auto tariffs are already doing harm here at home — stifling investment, likely costing jobs in the long-run and raising costs for American consumers,” Wyden said. “In one case, Ford announced that it decided not to sell a particular model of car in the U.S. because of the looming threat of tariffs. So that’s the start of Americans having fewer choices when they’re visiting showrooms. The president believes he has the authority to impose auto tariffs because the Congress gave it to him.

“So I want to put the administration on notice. Under the Constitution, it’s the Congress that’s in charge of trade and tariffs. In the absence of real strategy and tangible wins on trade, perhaps it’s time for the Congress to think about reclaiming that authority.”

Tariff Impacts

The committee also heard testimony from several individuals on the issue:

  • Michael Haughey, president and CEO of the North American Stamping Group
  • Rick Schostek, executive vice president of Honda North America, Inc.
  • Steve Gates, dealer principal of Gates Auto Family
  • Josh Nassar, legislative director of United Auto Workers
  • H. David Britt, chairman of the Economic Development Committee in Spartanburg, South Carolina, and a member of the Spartanburg County Council

“While I am here on behalf of Honda, I share the concerns about the potential impact of 232 auto tariffs with all sectors of the auto industry, including domestic and international automakers, suppliers, dealers and the aftermarket service and repair industry,” Schostek said. “The automotive industry is thriving as evidenced by our record-years of production, sales and exports of U.S.-produced vehicles.

“The industry is not seeking protection, and certainly not seeking additional tariffs, which will harm manufacturing in the U.S., our workers and, most importantly, U.S. consumers.”

Nassar said that at times tariffs can be an “appropriate tool,” but that they “do not constitute a comprehensive strategy.”

“We think a targeted approach is needed to address direct problems,” he said. “Having something that applies across the board without any real strategic sense doesn’t make sense and would not be a good idea. We’re keeping an open mind on the auto 232, but I want to emphasize that when we look at our competitiveness in the auto industry, we are falling behind. We do not have a comprehensive strategy. The reality is countries like Germany are spending a lot more resources and energy in trying to ensure they make the vehicles of the future, and we’re not doing that.”

Hatch asked Gates how he saw the effect of potential auto tariffs affecting consumers. Tariffs would raise costs and monthly payments for consumers, he said.

“To me, I think it’s devastating,” said Gates, a third-generation auto dealer employing 500 workers in stores located in Kentucky, Indiana and Tennessee.

Gates added that he didn’t think his company could “survive long term” if tariffs go through.

Schostek, in his submitted testimony, noted the steel tariff has resulted in “hundreds of millions of dollars in new, unplanned cost.”

Meanwhile, during a Bloomberg conference in New York on Wednesday, Ford CEO Jim Hackett said the Trump administration’s metals tariffs have cost the automaker $1 billion in profits.

Tariff Exclusions

As for tariffs already on the books — namely, the Section 232 tariffs on steel and aluminum of 25% and 10%, respectively — the Department of Commerce (DOC) has taken measures (as we noted previously) to improve the much-maligned exclusion request process.

The DOC began responding to requests in June, but the volume of requests (not to mention objections to requests) has proved to be substantial, resulting in a relatively small percentage of resolved cases.

Wyden, referring to testimony Secretary of Commerce Wilbur Ross gave in front of the committee earlier this year, criticized the process, saying it comes “straight from la-la land.”

“It is incomprehensible to figure out how it actually works,” Wyden said. “We keep hearing from constituents, all of us, that they can’t figure out what’s going to happen, are they going to be approved, aren’t they going to be approved.”

Wyden asked Schostek about his experience with suppliers as they’ve navigated the exclusion process. Schostek said three suppliers Honda North America has been tracking vis-a-vis their exclusion requests are still waiting on responses despite submitting their requests soon after the application window opened in June.

The result for those suppliers, and the users doing business with them, is uncertainty.

“We’re uncertain if they’re going to be able to get an exclusion,” Schostek said. “Of course, if they do then the tariff would not apply and things would be differently priced in the commerce we have with them.”

Schostek said he has heard there have been improvements in tackling the exclusion request backlog, but again referred to the three suppliers awaiting a response.

Sen. Debbie Stabenow (D-Michigan) also addressed the feeling of uncertainty within the framework of the Trump administration’s trade policy agenda at large.

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“What’s happening unfortunately is we’re sort of throwing everything at the wall, which is what they’re doing,” she said. “Section 232, Section 301, NAFTA … it’s as if there’s total instability right now.”

Full video of the hearing is available on the Senate Finance Committee website.

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