Tariff War

- Sep 11, 2019-

WASHINGTON—Auto parts makers and other business interests are doing their best to monitor the ever-fluctuating trade situation between the U.S. and China, especially in light of an unexpected new round of tariff hikes.

China, on Aug 23, said it would impose new tariffs of 5 percent to 10 percent on some $75 billion worth of U.S. goods, including oil and agricultural goods, as the latest G7 economic summit was set to begin in Biarritz, France.

On Dec. 15, China's tariffs on vehicles and vehicle parts will increase from 5 percent to 25 percent, the Chinese government said.

The Trump administration responded immediately, saying it would increase existing or pending tariffs on about $550 billion of goods imported from China by 5 percent.

Existing 25 percent tariffs on $250 billion worth of Chinese goods will rise to 30 percent, effective Oct. 1, according to an Aug. 23 statement from the Office of the U.S. Trade Representative.

The 10 percent tariffs on another $300 billion worth of goods that were set to begin Sept. 1 will increase to 15 percent, USTR said.

Among other products, the U.S. tariffs on Chinese goods cover virtually every type of tire as well as an enormous range of rubber automotive and industrial parts, rubber chemicals, and natural and synthetic rubbers.

The stock market's reaction to the new tariffs wavered with fluctuating statements from President Trump as to whether trade talks with China would continue. The president also said Aug. 23 that U.S. companies were "hereby ordered" to seek alternatives to doing business with China.

The Dow Jones Industrial Average fell 623.34 points on Aug. 23 to close at 23,628.90. The Dow made a partial recovery Aug. 26, regaining 269.93 points to close at 25,898.83. It fell 120.86 points Aug. 27, to close at 25,777.97.

Reaction from U.S. business interests to the new tariffs was cautiously phrased, but overwhelmingly negative.

"This is obviously an evolving situation," said a spokeswoman for the Motor & Equipment Manufacturers Association on Aug. 26. "All we really have to say at the moment is that MEMA has repeatedly called for China and the U.S. to work together to reach a trade agreement that works for both countries."

Two days before China and the U.S. disclosed their tariff hikes, MEMA held a roundtable discussion in Plymouth, Mich., with Michigan Congressional Democrats Debbie Dingell, Haley Stevens and Andy Levin on the effects of international trade policy on the motor vehicle supplier industry.

"(L)egislators and participants alike heard a steady message during the discussion: The motor vehicle parts supplier industry is a global but fragile industry at its breaking point," MEMA said in a press release.

"In particular, the cumulative effect of imposed and threatened tariffs, and the uncertainty that those policies create, will discourage growth in investment, jobs, and innovation in the United States," the association said.

The American Chemistry Council said that although it supports President Trump's efforts to hold China accountable for unfair trade practices, tariffs only will harm chemical manufacturers and their customers.

"ACC and our members continue to believe that negotiation is more effective than intimidation and retaliation," the ACC said.

"If this tariff dispute becomes a war of attrition, it has the potential to last for years, only doing more harm than good—to both sides," it said.

The National Retail Federation, whose members have been especially hard hit by tariffs, also reacted with dismay to the news of more tariffs.

"It's impossible for businesses to plan for the future in this type of environment," said David French, NRF senior vice president for government relations.

"The administration's approach clearly isn't working, and the answer isn't more taxes on American businesses and consumers," French said. "Where does this end?"