Opening the Hood on Tariffs
Terry H. Schwadron
March 14, 2018
At the White House, there are only simple categories with simple solutions.
Under the America First banner and the Buy American slogan, President Trump touted his recent announcement of tariffs on foreign-made steel and aluminum even as Wall Street, businesses, trade groups and many members of Congress warned of trade wars and loss of U.S. jobs at corporations dependent on steel.
Nevertheless, Trump has rolled on, trampling any criticism, in hopes of persuading the dwindling number of U.S. steelworkers (now about 40,000) that he can and will restoke steel-making factory furnaces, rebuilding jobs and economic confidence.
In response, lots of analysts have stepped forward with estimates that five times as many jobs will be lost at companies using steel as a component, from beverage producers to automakers. Indeed, the criticisms went to the heart of why if Trump wanted to punish China’s practices, he would not exempt for countries that are foreign policy allies, and whether the president was willing to risk a wider trade war on lots of other American-made products.
Therein lies the contradiction of Trump policy-making: It looks good, sounds good, but the effects most often miss the intended mark because the real world interferes.
As it happens that during this week, it was time to renew our family car lease, and so, we went by the Hyundai dealer, a South Korean brand that is targeted for steel import tariffs and may be targeted for auto imports as well. Among other things, I was curious to see what the impact of the announced tariff policies might be.
Now, our cars over the years, which have included Toyotas, Hondas, a Suburu, GM brands, a Ford truck and the Hyundai, all but one were American made. We always asked. The Sonata model we drove away was built in Alabama.
In fact, like Toyota and Honda, Hyundai not only has manufacturing facilities in Montgomery — Trump country — employing 3,000 workers, it maintains a design center in Irvine, California, a technical center near Ann Arbor, Mi., and a proving ground facility in the Mojave desert in California.
So, buying one of these cars is Buying American, right?
Bloomberg now reports that Hyundai is warning that it may rethink how many vehicles it builds in the United States over the steel tariffs issue. As it happens, Hyundai makes its own steel in plants in South Korea and one in China, and the company uses it in a variety of businesses, including auto-making. Hyundai also makes Kia cars in Georgia.
Trump’s plan is that the U.S. plans order tariffs of 25% on imported steel and 10% on aluminum. Toyota Motor Corp. and Ford Motor Co., have cautioned that the tariffs would make vehicles costlier while stopping short of saying the levies could impact production plans.
Hyundai called the plan “imprudent.”
“Changes to the existing tariff structure could negatively impact our current U.S. production and further expansion,” Jim Trainor, a Hyundai spokesman, told Bloomberg. “Imposing tariffs on steel could increase production costs, which could lead to higher prices for U.S. consumers, and, potentially, decreased demand.”
At Honda, a Japanese company, Teruhiko Tatebe, a spokesman, said that the tariffs would cause an unnecessary financial burden on its customers. The automaker sources its steel and aluminum extensively from U.S. suppliers, he said.
Toyota, which plans to build a new in Alabama with Mazda Motor Corp., said the administration’s decision will “adversely impact” auto companies by increasing costs and prices of cars and trucks sold in the U.S. Toyota says more than 90 percent of its steel are from U.S. companies.
At Hyundai, then, the company provides its own steel, perhaps the only car maker to do so.
Clearly all of this is happening while South Korea is critically linked with U.S. foreign policy interests to counter North Korea’s nuclear weapons ambitions. As a country, South Korea said last weekend it will “deploy all possible means” to respond to Trump’s decision on the tariffs, according to Kim Dong-yeon, the country’s finance minister. South Korea, the world’s third largest steel maker, has formally filed for exemption from the tariffs.
It should not be overlooked that timing may have been a factor in making the tariff announcements in time to try to influence voters in the congressional election western Pennsylvania, where decline of the steel industry has been felt in continuing layoffs.
Maybe the White House should add a category for Not So Simple.