Legendary Ohio State football coach Woody Hayes hated the forward pass because “three things can happen and two of them are bad.” That’s worth remembering as the clock ticks down toward the deadline this weekend for a Presidential decision on imposing tariffs as high as 25 percent on autos and auto parts.
We don’t profess to know what the decision will be, though rumors are rampant. We don’t know what the Commerce Department concluded in the report it sent to the President on the national security implications of trade in autos and auto parts. (That’s a problem in and of itself.) We do know that the tariffs that have been imposed – on steel and aluminum, on products from China, on washing machines, and on many other products – haven’t produced the results promised. They’ve raised prices, squeezed businesses, and led to retaliation that’s hurt our farmers and other exporters.
We further know what 25 percent tariffs on autos and auto parts would do to the U.S. economy. With respect to the potential auto tariffs, there are three possibilities:
One, the U.S. could announce that it’s going to impose tariffs. This, plain and simple, would be a tax increase on American consumers, who would see overall car prices rise up to $4,400, and imported vehicle prices rise up to $7,000. As White House advisor Lawrence Kudlow acknowledged this weekend, the costs of tariffs are borne by Americans who have to pay them.
Two, the U.S. could say it’s going to impose tariffs, but will hold off pending negotiations with our trading partners. Unfortunately, the continued threat and uncertainty surrounding tariffs freezes investment and production plans, tamping down economic growth.
Or three: the U.S. could declare that autos and auto parts are not national security threats, and there will be no tariffs. Along with huge sighs of relief from auto workers across the country, the auto industry could then go about its business of building cars and trucks that people want and can afford.
So that’s three possibilities, two of which are bad. Let’s hope that the decision that’s made is the right one.