Trump Auto Tariffs Play to His Base But Alienate His Allies

Date: Tuesday, May 29, 2018
Source: Bloomberg

Nobody asked for it, few seem to want it and yet the Trump administration is considering imposing tariffs on imported cars and trucks, threatening not just a shake-up of the global auto industry but political discord even among the president’s allies.

President Donald Trump’s order to investigate auto imports for potential trade penalties on national security grounds came as a surprise and quickly drew opposition from the industry and Republican lawmakers. 

Trump appeared focused on the short term political gains, teasing "big news coming soon for our great American Autoworkers" before he issued the directive. He then invoked the same economic populist themes that drove his presidential campaign, boasting Thursday that he would stop "cars pouring into our country and hurting our jobs."

“He knows that it sounds really good to his base voters and he wants something he can talk about in those campaign rallies that’s going to get a big applause line,” said David B. Cohen, a professor of political science at the University of Akron. “It’ll be very effective, even though many of those rally-goers are going to leave the rally and they’re going to get into their Honda or their Toyota or their Hyundai and not appreciate the irony.”

Tariffs and Elections

If Trump chooses to move ahead with the tariffs, the protectionist maneuver may help energize his working-class base before November’s midterm elections and turn them out to vote in key Senate races. Yet it risks raising car prices, complicating pending trade talks, and antagonizing lawmakers into re-examining presidential trade authority.

Trump ordered the investigation under Section 232 of the Trade Expansion Act of 1962, the same power he used to impose global tariffs on imported steel and aluminum earlier this year. A tariff on vehicles of up to 25 percent is under consideration, according to a person familiar with the matter who asked not to be identified.

Trump’s directive, issued late Wednesday in a written statement, surprised the industry, labor, lawmakers and many of the president’s own advisers.

Unions were not told ahead of time, a labor official said, and several Republican members of Congress from states with a substantial auto industry presence said Thursday they were unaware of the announcement or learned about it from news reports.

National Security?

The Auto Alliance, a trade association that includes the three major U.S.-based car manufacturers, said in a statement it is “confident that vehicle imports do not pose a national security risk to the U.S.”

The only earlier hint of a Section 232 action was in the April 2017 memo from Trump triggering the probe into steel and aluminum that led to the tariffs he announced in March. In that document, "vehicles" are listed as "critical elements of our manufacturing and defense industrial bases, which we must defend against unfair trade practices and other abuses."

Republicans on Capitol Hill didn’t offer support. And some in Trump’s own party denounced the action as a political ploy that could hurt American trade policy and consumers.

The move is "dangerous," Senate Foreign Relations Committee Chairman Bob Corker of Tennessee said Thursday

“It feels more like it has to do with domestic politics or some other issue, and I hope that will be abandoned quick. I think that’s dangerous and destabilizing and should end immediately," added Corker, whose state is home to Nissan’s North American headquarters and a major Volkswagen plant.

Section 232 Rationale

The use of Section 232 to order the trade investigation by Commerce Secretary Wilbur Ross stirred particular concern, as some lawmakers said the national security rationale was an obvious ruse.

“It’s an improper use of trade law. So my hope would be that Secretary Ross would review the president’s request immediately and say, ’no, this is a bad idea,’" said Lamar Alexander, Tennessee’s other senator.

Senate Homeland Security Chairman Ron Johnson said Congress should claw back some of the powers it has given the president to impose tariffs by citing security reasons. 

“I would really caution the administration from claiming it’s national security interest when it’s clearly an economic issue," the Wisconsin Republican said. “Unfortunately, prior Congresses have given any administration an awful lot of authority in these areas. We need to start reclaiming some of that authority."

Asked about the issue outside the White House after a bill-signing ceremony, House Financial Services Committee Chairman Jeb Hensarling, said, "Frankly, I don’t believe the Honda Accord is a threat to U.S. national security."

Major business groups also slammed the directive.

U.S. Chamber of Commerce President and Chief Executive Officer Thomas Donohue said that if Trump were to take action, it would "deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war."

Jay Timmons, the chief executive officer and president of the National Association of Manufacturers said that “manufacturers in the United States want to give every advantage to American workers. But incorrectly using the 232 statute will create unintended consequences for U.S. manufacturing workers that will limit the chance for Americans to win.”

Battleground Dynamics

Still, the action won praise from auto workers, a key constituency in the battleground states of Michigan and Ohio which Trump carried in 2016.

“I welcome the fact that they’re investigating this,” United Auto Workers President Dennis Williams said Thursday in Detroit. “The United States became a dumping ground for a lot of countries at a very low cost.”

Trump’s public emphasis on auto workers points to his hope that the issue will be a winner with voters in November, even if Republican elected officials remain opposed. "I think your auto workers and your auto companies in this country are going to be very happy," Trump told reporters before his announcement on Wednesday.

Republicans aim to defeat incumbent Democratic senators in several rust belt states, including Indiana, Michigan, Ohio and Pennsylvania. So far, candidates from both parties in those races have remained silent on Trump’s action.

Union members may not pay close attention to the details or effects of Trump’s tariffs, More important is the sense among many of them that he is at least fighting forces that have hurt them badly, said Glenn Perusek, an Ohio-based union consultant and former head of AFL-CIO’s strategic research center. That could help Republicans in key midterm races.

’The Allentowns of the World’

"You say for a whole generation -- and people buy that argument -- that globalization is fundamentally responsible for the devastation of our communities, and job losses, and then a candidate comes along, a president comes along, who says, ‘I completely agree with you, and I’m going to fight for that,’” he said. “It divides the Democratic coalition, particularly among union members.”

The trade issue "won’t have much impact in Philadelphia or Pittsburgh,” said Dan Luria, a former member of the UAW research department who’s now an independent auto analyst in Brighton, Michigan, using the battleground state of Pennsylvania as an example. “But it will help Trump in places that have been devastated -– the Allentowns of the world –- and it’s not obvious how the Democrats will then be able to flip the state back.”

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