Trump's call for auto tariffs isn't an idle threat

When representing any industry in Washington, D.C., there's always a danger of falling into what I call the "Chicken Little" trap.

You don't do yourself, or the members you represent, any favors by trying to constantly convince them the sky is falling. Over my many years on Capitol Hill, in the Department of Commerce, and now representing America's 9,600 international nameplate auto franchises with AIADA, I've made it my goal to approach all challenges with a strong dose of pragmatism and all cries of "Panic!" with a grain of salt.

I know my dealer members today have plenty on their plates, so I don't say this lightly: The auto retail industry in America is facing a real threat.

President Donald Trump, along with Commerce Secretary Wilbur Ross, wants to add a 25 percent tariff on all auto imports and parts by labeling them a threat to national security. That's right: According to the president, your Volvo is a danger to democracy.

Unfortunately, this isn't a joke. He used the same maneuver with steel and aluminum, and now he has turned his sights on so-called foreign automakers.

The problem, of course, is twofold. First, foreign doesn't mean what it once did. Today's auto industry is highly globalized and efficient. America's biggest auto exporter today is BMW, which builds all of the utility vehicles it sells worldwide in Spartanburg, S.C.

What's more, the auto industry in America is flourishing, and production has doubled over the past decade. Not a single manufacturer is asking for the White House to "help" them out by making their products unaffordable and more difficult to attain for millions of Americans.

These tariffs would add about $6,400 to the price of a $30,000 car. That's a punishing blow against import-brand automakers that invest heavily in American facilities and workers. These companies are responsible for 1.29 million U.S. jobs, 32 manufacturing facilities and $75 billion invested into operations. In 2016 they built 5.5 million vehicles — 47 percent of all U.S. vehicle production — and exported 925,000 of them.

Second, tariffs are taxes. After doing a lot of good for American businesses and consumers by rolling back burdensome federal regulations and passing a comprehensive tax cut, the Trump administration is on the verge of erasing all of its hard-won progress. With this proposed 25 percent tariff, Trump could make cars and trucks unaffordable for many American families. That's going to put at risk the 577,000 jobs held by American workers at international nameplate franchises as well as the jobs of auto plant workers from 14 auto producing states, 12 of which voted for Trump in 2016. A recent study by the Trade Partnership found that a 25 percent tariff would result in a net loss of 157,000 U.S. jobs while driving the GDP down by 0.1 percent.

These tariffs immediately bring to mind some of our industry's most intense battles. First, the Chicken Tax of 1963, put into place by President Johnson in response to French and German tariffs on American chickens. More than 50 years later, the tax is still in place, effectively preventing the import of pickup trucks and limiting American drivers to just six brands of trucks from which to choose, while they have 30-plus options for cars.

And don't think the tax only hurts international brands. The Chicken Tax is why Ford, until it was forced to stop in 2013, built its Transit Connect cargo van in Turkey, imported it into the U.S. as a passenger van, and then hired contractors at the Port of Baltimore to rip out the backseats, flooring and rear windows.

The second crisis that comes to mind is the 10 percent luxury tax collected on "high line" cars (anything that cost more than $30,000) between 1990 and 2002. That tax failed to accomplish its purpose — paying for the tax cuts of the 1990s — and instead reduced auto sales by an estimated 20 percent and forced many dealers to pay the tax themselves just to stay in business.

And finally, who can forget the 100 percent tariffs that the Clinton administration threatened against Japanese luxury vehicles in 1995? At the time I was working in government relations for AIADA, and I vividly recall the alarm from our members who recognized that those tariffs would destroy their livelihoods and those of their employees. AIADA then, as it is doing now, shifted into high gear, advocating for international nameplate dealers on the Hill, in the White House, on the campaign trail, and even in Japan. We were determined to sink the plan, and fortunately, in the 11th hour, we did.

These auto trade blunders, past and current, should loom large in any discussion over Trump's new 25 percent tariff plan.

History plainly shows us that making some autos unaffordable won't strengthen America's economy or its position as a world leader. It simply punishes auto manufacturers, retailers and the communities they serve.

This isn't an idle threat from the president. It's really happening — the public hearings have been scheduled for July. Whether you build cars, sell cars or drive cars, heads up: If these tariffs are implemented, the sky is falling.