General Motors Co. warned Friday that the Trump administration’s proposed automotive tariffs may curb sales worldwide, forcing the iconic American carmaker to cut production and lay off workers.
GM’s statement, filed in response to a Commerce Department investigation of whether auto duties are needed to protect national security, reflect broad concern from business and lawmakers in the president’s own party that the White House’s protectionist trade policies will undermine the U.S. economy. Levies imposed on steel and aluminum imports, also on national security grounds, have already prompted retaliation from long-time U.S. allies like Canada and Europe and spurred motorcycle-maker Harley Davidson to move some production outside the U.S.
“Import tariffs could lead to a smaller GM, a reduced presence at home and abroad,” and risk less — not more — manufacturing jobs, the Detroit-based carmaker said. “The threat of steep tariffs on vehicle and auto-component imports risks undermining GM’s competitiveness against foreign auto producers by erecting broad-brush trade barriers that increase our global costs, remove a key means of competing with manufacturers in lower-wage countries, and promote a trade environment in which we could be retaliated against.”
General Motors fell 2.8 percent to $39.40 in New York trading on Friday. The potential risk from the duties grows , the company said, when combined with Trump’s widening trade disputes with China as well as with traditional U.S. partners. Should the threats and counter-threats spur an all-out trade war, economists say, the benefits of last year’s GOP-led tax cuts may be lost, and the world might, ultimately, topple into recession.
“U.S. auto companies need U.S. trade deals that recognize the strength that comes from global operations and a global supply chain,” GM executives wrote. “GM suggests prioritizing work with our adjacent trading partners to strengthen U.S. manufacturing.”
The closest U.S. trading partners, Canada and Mexico, and the retail and automotive supply chains that rely on them have been a key concern for industry leaders and investors as Trump seeks to renegotiate the North American Free Trade Agreement, a process fraught with volatile rhetoric.
GM, which employs about 110,000 people in the U.S. and buys tens of billions of dollars of parts from American suppliers, “remains committed to our home market” and prefers cross-border agreements that facilitate growth, the executives wrote
Rival Kia Motors, which along with suppliers employs about 25,000 U.S. workers, said the tariffs would push up costs at its Georgia plant by about 10 percent and force it to trim a network of dealerships in the U.S.
Wide tariffs on automobiles and auto parts cannot be justified by Section 232 of the Trade Expansion Act of 1962 — the section of law that allows levies on national security grounds — because “there is no sufficient nexus between these goods and a direct threat” to the U.S., the Korean carmaker wrote.
Across the U.S. auto industry, a 25 percent tariff would trim output by 1.5 percent and cost 195,000 U.S. workers their jobs over a period of one to three years, according to the Auto Alliance, a trade group for companies behind 70 percent of U.S. auto sales. Buyers of imported cars would pay an average of $5,800 more, costing American consumers about $45 billion, based on 2017 sales data.
“While we understand that the administration is working to achieve a level playing field, tariffs are not the right approach,” the group said in a statement on Wednesday.
Incorrectly using the Section 232 provisions will “put the U.S. manufacturing sector at a global disadvantage,” the National Association of Manufacturers told the Commerce Department on Friday. The group, which represents companies that contribute $2.25 trillion to the U.S. economy and employ 12 million, warned of fallout including higher production costs, reduced exports, lower production and declining employment.
Indeed, retaliation for U.S. tariffs on cars might prompt GM and other automakers with international sales to move jobs outside the country to avoid the penalties, just as Milwaukee, Wis.-based Harley-Davidson decided to do earlier this week, earning a volley of critical Twitter posts from President Trump.
Complaining that he’d been “very good” to the company, the president said the majority of businesses are returning to the U.S., not leaving it, and argued that his policies are paying off handsomely in talks with U.S. trading partners.
“We’ve got a little bit of uncertainty,” he conceded, noting the lackluster response of equity markets to the trade moves. “But to me, there’s no uncertainty. To other people that happen to be smart, there’s no uncertainty.