Idea of Auto Tariffs Panned by Senate Finance Committee

Both Democrats and Republicans said auto tariffs aren't going to help add U.S. manufacturing, and numerous members of the Senate Finance Committee questioned the logic of the Trump administration's national security rationale for threatening them. Sen. Rob Portman, R-Ohio, noted that he has a bill that would not allow the president to act unilaterally to raise tariffs on autos or auto parts under Section 232, and that Honda North America has endorsed it. But little of the two-hour hearing focused on how Congress could take back power on trade to constrain the administration. Even committee ranking member Ron Wyden, D-Ore., who criticizes the president's trade policy as chaotic and ineffective, hedged that "perhaps" it is "time for the Congress to think about reclaiming that authority," in his opening statement.

No senator expressed support for tariffs on imported autos or auto parts, though several Democrats were critical of automakers' decisions to move vehicle assembly or parts work to Mexico. Josh Nassar, legislative director for the United Auto Workers, told lawmakers, "We need to re-examine our trade agreements fundamentally." He criticized business interests who say that it's wrong to try to force too much production to happen in the U.S because "we can't build certain parts here any more. Those were deliberate decisions by companies. We are proud we helped establish manufacturing jobs as middle-class jobs. That is less and less the case today."

But Nassar, who praised the use of tariffs in some situations and said that the UAW is "keeping an open mind on the auto [Section] 232s [tariffs]," added: "We think a targeted approach is needed. Having something that applies across the board doesn't make sense and would not be a good idea." Nassar said that Canada's workforce has a similar standard of living to that of U.S. workers, and that a trade deficit in cars with Canada should not be viewed the same way as for one with Mexico. Under the NAFTA renegotiation, Mexican auto parts makers would be allowed to sell 40 percent more than they do now duty-free even if Section 232 tariffs are applied globally.

Michael Haughey, CEO of North American Stamping, a $450 million Tier 2 auto supplier, said the specter of auto tariffs is one of many administration decisions that is causing auto manufacturers to hold back on hiring and investment. He said that his company, which has 10 U.S. facilities and three foreign plants, is spending $10 million more on steel since the Section 232 tariffs were applied, even though nearly all of its purchases are of domestic steel. He can't pass that on to the Tier 1 suppliers that are his customers, he said. He said other drags on the auto industry are the expiration of tax credits for electric automobiles and proposals to roll back environmental standards -- including backing away from improved mileage requirements.

Committee Chairman Orrin Hatch, R-Utah, noted that trade in autos was more than $200 billion, four times larger than the combined steel and aluminum trade. Rick Schostek, executive vice president of Honda North America, said simply that "the auto industry is not seeking protection and certainly not asking for new tariffs." Honda has 31,000 employees in the U.S. Of Hondas sold in the U.S., 66 percent are assembled domestically, 20 percent in Canada and 7 percent in Mexico.

Portman noted the hearing was timely, because he's hearing that the Section 232 tariffs on steel and aluminum are holding up an agreement with Canada, and that Canada also cannot close NAFTA unless it knows it won't be hit by tariffs on autos or auto parts. "My sense is that 232 is a shadow over those talks, and one of the most important issues to be resolved," he said.