After nine months of investigation, the U.S. Department of Commerce submitted a concealed national security report on Sunday that prompted an immediate backlash from the auto industry.
The report on the threat posed by imports of automobiles and automobile parts to the country’s national security was submitted to the White House late Sunday night, just two hours before the deadline. Last May, at President Trump’s request, the department launched the Section 232 investigation into whether imported vehicles and auto parts constitute a national security threat.
The investigation is a part of a broader agenda related to U.S. trade and the auto industry, including expanding domestic auto manufacturing, addressing bilateral trade deficits, and reducing disparities in U.S. and trading partner tariff rates, according to the Congressional Research Service.
Local automotive suppliers feel “under threat” from the investigation and potential tariffs, including tariffs that have already been instated, as MiBiz previously reported.
“I don’t feel that it is a national security issue. It feels a little bit like a loose interpretation of the law,” Kevin Clay, vice president of sales and business development at Pridgeon & Clay Inc., a Grand Rapids-based supplier of metal stampings, told MiBiz last month.
Currently, the raw material that Pridgeon & Clay uses to make auto parts falls under the tariffs, but the parts themselves do not, opening up direct competition from lower-cost, offshore producers in China and India, according to Clay.
The newly report submitted has not yet been made public.
Beyond the supply chain, automotive dealers also say they’re facing challenges related to the tariffs, in addition to pricing concerns.
“Now, dealerships must continue to operate under a cloud of uncertainty, not knowing if at any moment their products will be slapped with 25 percent tariffs, raising vehicle and repair costs by thousands of dollars and slashing sales,” American International Automobile Dealers Association (AIADA) President and CEO Cody Lusk said in a statement, calling the investigation “bogus.”
President Trump has stated a desire to place a 25 percent tariff on imported autos. The White House has 90 days to decide whether to act upon the undisclosed recommendations.
“Dealers, their employees, and the communities they serve are being treated like pawns by their government,” Lusk said.
The Motor and Equipment Manufacturers Association (MEMA), which represents suppliers and parts manufacturers, called for an immediate release of the full report.
“Secrecy around the report only increases the uncertainty and concern across the industry created by the threat of tariffs,” according to a statement from MEMA, which added that the effects of further tariffs would be “long-term and far-reaching.”
Ford Motor Co. and General Motors each have reported that to date, they have absorbed approximately $1 billion in tariff costs.
“These tariffs, if applied, could move the development and implementation of new automotive technologies offshore, leaving America behind,” according to MEMA.
Tariffs have become part of the Trump administration’s trade strategy against countries like China, Japan, and most of the European Union, which the president has accused of acting unfairly.
“I love tariffs, but I also love them to negotiate,” Trump said Friday during a press conference in the Rose Garden.
A surge of tariff exemption applications also has overwhelmed the Department of Commerce, according to a report from the Associated Press. So far, the department has approved waivers for 370 companies for up to 4.1 million tons of foreign steel, with roughly 8 percent of the total coming from China and close to 30 percent from Japan, according to an AP review of thousands of applications for relief from import taxes. More than 38,000 requests still await rulings.
While auto suppliers wait for a reaction to the report from the White House, Clay said companies like his cannot hold off on making tough decisions about future investment.
“I’ll tell you the next piece of capital equipment that you put in, you are very unlikely to put in America,” Clay told MiBiz for a prior report. “That’s the prudent decision to make — really the only decision to make.”