Washington — Japanese automakers warned the U.S. government Friday that tariffs of up to 25 percent on imports of cars and auto parts would result in higher prices for domestic car-buyers.
The Japanese government, while not explicitly saying it would retaliate with its own tariffs, warned that “rebalancing measures” by other countries might hurt U.S. manufacturing and agriculture. And Fiat Chrysler Automobiles has starting making its own plans to adjust its manufacturing footprint globally as President Donald Trump’s threats over levies escalate.
Robert Lee, head of Fiat Chrysler U.S. LLC’s Powertrain Coordination and a member of the automaker’s Group Executive Council, said in an interview with Bloomberg News that the Italian-American automaker is developing contingency plans to alter its manufacturing strategy if tariffs increase the cost of building vehicles in the U.S.
“It’s contingency planning on a massive scale – supply-based planning, logistics planning, vehicle-build location planning,” Lee said in an interview Thursday. “This is not trivial, and it’s been going on for awhile.”
The U.S. Commerce Department is conducting an investigation of the national security impact of allowing imported cars to come into the U.S. at the request of Trump. In making the request, Trump cited a section of federal law that allows the president to impose tariffs if he determines a security threat exists.
In comments submitted to the Commerce Department, Toyota warned that tariffs has high as 25 percent that are under consideration by the Trump administration would increase the cost of a Toyota Camry by $1,800.
“A potential tariff on automobiles and parts would have a negative impact on all manufacturers, increasing the cost of imported vehicles as well as domestically produced vehicles that rely on imported parts,” Toyota wrote. “To give a Toyota example, the Camry is built in Kentucky, and has been the best-selling car in America for 19 of the last 20 years and one of the best American-made cars you can buy. But even the Camry has about 30 percent non-U.S. content. This means the Camry would see a cost increase of $1,800 (based on a price of $23,645). Ultimately, this cost will likely be passed along to consumers in the form of higher prices.”
Mazda warned Friday that a 25 percent tariff on its products would force a reassessment of its U.S. manufacturing plans and ability to maintain a robust domestic dealer network.
“If the maximum tariff of 25 percent were to be imposed on imported automobiles, like other automobile manufacturers, Mazda would incur a substantial financial burden,” the company wrote. “It might also result in changes to the company’s plans to invest in its dealer network and in the new plant in Alabama, and endanger the company’s U.S. business, which employs more than 30,000 workers.”
“In addition, an increase in the price of the company’s automobiles as a result of the tariff and a subsequent decline in sales would have an adverse effect on the company’s ability to maintain its dealer network, inconveniencing the more than 1.5 million owners of Mazda vehicles throughout the U.S. when they need service,” Mazda continued.
The Japan Automobile Manufacturers Association, which represents Japanese cars manufacturers like Honda, Toyota, Nissan, Subaru and Mitsubishi, warned Friday that tariffs on automobiles and automotive parts imported to the United States “would have a serious negative impact on U.S. consumers and workers, the U.S. automotive sector and the U.S. economy.”
The group also questioned the idea that imported cars propose a national security threat that would warrant tariffs. “Imported vehicles do not threaten the United States national security,” the JAMA wrote. “Rather, they increase the options for users’ diversified needs with regard to vehicle supply while creating new demand in the market, and they have contributed to the sustainable growth of the U.S. automobile industry including vehicle dealerships.”
The Japanese government said Friday that threatened tariffs on cars and auto parts would put “the global free trade system at great risk.” While Japan didn’t explicitly threaten retaliation, it said “rebalancing measures” by other countries “might well result in damage to the U.S. manufacturing and agricultural industries.”
Japan stressed its carmakers’ contributions to the U.S. economy. It noted that Japanese automakers produce “as many as 3.8 million cars” in the U.S., many of which are subsequently exported. Any U.S. trade restrictions “could seriously affect more than 1.5 million jobs created by Japanese auto-related companies in the U.S.,” it said
The tariff investigation process, known as a Section 232 investigation in reference a trade law passed in 1962, was used recently by the Trump administration to propose tariffs on imported aluminum and steel. The Trump administration has argued that auto imports pose a similar threat. “Core industries such as automobiles and automotive parts are critical to our strength as a nation,” the White House said in May 23 statement announcing the launch of the investigation.
The investigation and implementation could take up to a year, if the example of the metals tariff is any indication.
U.S. lawmakers have also raised concerns about increased cost to car buyers.
“The average price of an imported car is $23,200,” U.S. Sen. Orrin Hatch, R-Utah, said in a committee hearing last week. “If the Department of Commerce were to recommend a 25 percent tariff on cars, it would be recommending raising the cost of an average imported car for an American family by $5,800. To put that in perspective, the median household income in the United States is just over $59,000. That means that roughly 10 percent of the median household income could be erased purely by the additional cost of a single car.”
Bloomberg News contributed.
klaing@detroitnews.com
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