Prepared Remarks by Senator Chuck Grassley of Iowa
On 232 Auto Tariffs
Thursday, February 14, 2019
Today, I want to express my concerns about potential new tariffs. In a few days, the Secretary of Commerce is expected to provide the President a report. This report will detail his Department’s findings in the investigation of whether imports of automobiles and auto parts pose a national security threat to the United States.
Let me say that one more time. Whether cars that every day Americans rely on to get to work, drive their children to school, and visit their families threaten our national security.
I agree with the President that we must have fair and enforceable trade agreements that benefit Americans. Sometimes we have to make hard decisions in order to get there. But I do not agree that we should alienate our allies or jeopardize the health of our own economy to achieve good outcomes.
The Tax Foundation has found that a 25 percent tariff on auto imports would amount to a roughly $73.1 billion tax increase.
According to the Center for Automotive Research, a 25 percent tariff on auto imports would also result in the loss of over 700,000 jobs and raise the price of an average car by nearly $7,000. Dealers would see a decline in annual sales by as many as 2 million vehicles. Consumers would face up to a 10 percent increase in the cost of repairs and replacement parts.
In short, raising tariffs on cars and parts would be a huge tax on consumers who buy or service their cars, whether they are imported or domestically produced.
And make no mistake – Americans will be paying these taxes. Tariffs are a tax paid at the time of import. Historically, they have been a protectionist tool intended to prop up domestically produced goods by making foreign goods more expensive.
But tariffs are not a long-term solution, and nobody wins in the end. While they may provide short-term protection for domestic industries, they do so at the expense of ordinary consumers and industries increasingly dependent on complex global supply chains. On the whole, this is damaging to the economy.
A 2018 study by the International Monetary Fund reviewed tariff changes across 151 countries from 1963 to 2014. It found that tariff increases lead to less output and productivity and more unemployment and inequality.
The recent U.S. tariff increases have invited tariff retaliation from our trading partners. I know because Iowans are bearing the good brunt of this retaliation. Imposing tariffs on auto imports will inevitably invite more retaliation, and we simply cannot afford this.
The United States must continue to lead the world on trade and economic issues. We have benefited from one of the most open markets in the world, and we must continue to lead the world by providing a good example.
President Trump is right to hold our trading partners accountable. But we can’t take the benefits we have received from international trade for granted. International trade has been a tremendous benefit to farmers and businesses in Iowa and across the country.
We are better off because we can sell our products around the world. And these are some of the best products in the world.
In this vein, I hope the President will heed my call to forego the auto tariffs and focus on opening new markets. The U.S. auto industry is a major driver of our economy, supporting nearly 10 million American jobs and accounting for 3 percent of our GDP. Without question, any tariffs that are imposed will have a negative effect on the U.S. auto industry and our economy.
Our focus instead should be on strengthening our relationships with our allies while targeting China’s harmful trade practices and policies. Tariffs on autos and auto parts will not help us achieve these critical priorities.