Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.
1st Gear: Nothing About Trump’s Car Tariffs Makes Sense
Now, don’t take it from me, a pinko treehugger, take it from Dan Ikenson, the director of the Center for Trade Policy Studies at the Cato Institute. For those who don’t know, the Cato Institute is a libertarian think tank known for supporting hyper-liberal causes like “limited government.” One story currently up on their homepage simply asks the question, “Is Public Schooling A Public Good?” (It is.)
Anyway, here’s Ikenson, via Bloomberg:
“There are no merits whatsoever to the argument that imported autos somehow threaten U.S. national security. The mere assertion is unworthy of consideration, much less a full blown investigation under the guise of law,” [Ikenson] said. “President Trump is misappropriating the law in ways not dissimilar to the methods used by Hugo Chavez and Nicolas Maduro to destroy Venezuela, and Congress needs to start treating this regime as the profound threat to the republic that it clearly is.”
Strong words! Since the news that the Trump administration would be considering the tariffs broke, Ikenson has been joined by pretty much everyone else in criticizing the plan. But, you say, surely there must be some reasoning behind the Trump plan beyond short-term political gains, as mid-term elections get closer?
Here’s more from Bloomberg:
If Trump chooses to move ahead with the tariffs, the protectionist maneuver may help energize his working-class base before November’s midterm elections and turn them out to vote in key Senate races. Yet it risks raising car prices, complicating pending trade talks, and antagonizing lawmakers into re- examining presidential trade authority. Trump ordered the investigation under Section 232 of the Trade Expansion Act of 1962, the same power he used to impose global tariffs on imported steel and aluminum earlier this year.
A tariff on vehicles of up to 25 percent is under consideration, according to a person familiar with the matter who asked not to be identified. Trump’s directive, issued late Wednesday in a written statement, surprised the industry, labor, lawmakers and many of the president’s own advisers.
But surely Republicans still support their leader on this? Here’s The New York Times:
Even members of the president’s own party warned of the debilitating uncertainty businesses are facing from his scattershot approach.
“You pass a permanent tax reform for corporations and say, let’s do business in America,” said Douglas Holtz-Eakin, the president of the American Action Forum, a conservative-leaning think tank, and a former director of the Congressional Budget Office. “And then every day, you don’t know which of your goods will have a tariff wall around it. It makes no sense.”
“If this proposal is carried out, it would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war,” said Thomas J. Donohue, the president of the U.S. Chamber of Commerce.
Senator Patrick J. Toomey, Republican of Pennsylvania, blasted the potential for tariffs on imported vehicles as a “bad idea,” and added, “This is a dangerous course and should be abandoned immediately.”
Oh. Well, hmm.
2nd Gear: What About Dealerships And Automakers? Surely They Love The Idea Of Tariffs, I Mean Someone Has To, It Can’t Really Be Everyone Who Hates Trump’s Plan
Here’s Cody Lusk, president of American International Automobile Dealers Association, which represents 9,600 dealers, via Bloomberg:
“It can’t be repeated enough: Tariffs are taxes. American families who can least afford a 25 percent price increase on vehicles will bear the burden of this tariff,” [Lusk] said. “To treat auto imports like a national security threat would be a self-inflicted economic disaster for American consumers, dealers, and dealership employees.”
The Auto Alliance, a trade association that includes the three major U.S.-based car manufacturers, said in a statement it is “confident that vehicle imports do not pose a national security risk to the U.S.”
And more, from John Bozzella, president of Global Automakers, a Washington trade group that represents car manufacturers including Toyota and Hyundai, via The Wall Street Journal.
“To our knowledge no one is asking for this protection,” said John Bozzella, president of Global Automakers, in statement. He said the tariffs would “undermine the health and competitiveness of the U.S. auto industry and invite retaliation by our trading partners.”
3rd Gear: What About The World? How Is The World Reacting To The Idea Of Tariffs? I Mean, There Has To Be Some Constituency For Car Tariffs Outside Of Our President.
Here’s Hiroshige Seko, Japan’s trade minister, again via WSJ.
“If it comes into effect, it would cause very broad restrictions on trade and create disarray in global markets. It is very regrettable,” said Tokyo’s trade minister, Hiroshige Seko.
And here’s Eric Schweitzer, the president of the Association of German Chambers of Commerce and Industry, a lobbying group, from Bloomberg:
“We have to consider this as something of a provocation,” the president of the lobby group said. “I have the growing impression that the U.S. no longer believes in the competition of ideas, but only the law of power. It fills me with grave concern.”
Here’s the reaction from up north, via Reuters:
“I am - even more than I was with steel and aluminum - trying to figure out where a possible national security connection is,” Trudeau said at the luxurious riverside hotel that will be the site of a Group of Seven summit in June.
“Taking that a step further into autos seems to me to be on even flimsier logical grounds,” Trudeau said. “But we know that this is very much linked to ongoing negotiations around moving forward on NAFTA.”
Imposing tariffs could cause chaos for a Canadian auto industry that is heavily integrated into the North American economy. Canada is home to major plants operated by General Motors, Ford, Fiat Chrysler, Honda and Toyota.
In Ottawa, Foreign Minister Chrystia Freeland told reporters the idea that Canadian-made autos posed a security threat was “frankly absurd and that is a point we are making very clearly to our U.S. partners and allies.”
Ah, hmm, so, to recap, that’s Republicans, the entire auto industry, world leaders, and the Cato Institute who hate the idea of car tariffs, in addition to the usual Trump antagonists like Democrats. Huh. Well, they seem like bad idea, but it’s possible that everyone else is wrong and Trump’s right, I suppose.
4th Gear: The EPA Isn’t Done With Volkswagen Just Yet
The emissions scandal known as Dieselgate will seemingly never end for Volkswagen, who really deserve all they’re getting. The latest sign that VW is still in this for the long haul? Comments by an EPA official reported Thursday in the German newspaper Handelsblatt.
“The VW story is not over yet, not for VW and not for the EPA,” the business daily quoted Christopher Grundler, director of the EPA’s Office of Transportation and Air Quality as saying.
But some senior managers including previous chief executive Matthias Mueller have said the task of learning from past mistakes and introducing change was proving harder than expected as some managers were resisting the transformation.
“What matters to the EPA is compliance where the spirit of laws is respected rather than just the text of the law,” Grundler said. “I absolutely want to hear from VW what their efforts to this end look like and how they make sure that such a thing (like the emissions scandal) will never happen again.”
Handelsblatt also quoted Larry Thompson, the U.S. monitor appointed under the 2017 plea agreement to oversee VW for three years, as saying that he is “not at all satisfied” with the progress of culture change.
VW on Thursday said Thompson’s findings had uncovered “a need for action” to establish integrity and compliance rules across the multi-brand group as it struggles to overcome the scandal.
A scandal that was long in the making requires a fix that was never going to happen overnight.
5th Gear: China Is Getting More Serious About Competing Globally
It’s thinking about letting private automakers invest in its state-owned automakers, a move which would help them compete with companies like Toyota, in addition to the German manufacturers.
A policy paper outlining the proposal is being studied by government departments, said the people, who asked not to be identified disclosing private discussions. The plans are preliminary and could change depending on feedback from different agencies and industry players, they said. The proposals don’t specify what level of stake is permitted. The National Development and Reform Commission, the government’s key planning body, didn’t immediately respond to a fax seeking comment.
China, which identified automobiles as one of the key industries in its efforts to beef up the country’s manufacturing and innovation capabilities, is trying to build world-class automakers that can then compete with multi-national corporations. Bringing private investment into state-owned automakers such as China FAW Group Corp. and Dongfeng Motor Corp. would be in line with the so-called “mixed-ownership reform.”
So this is all a bit hypothetical for now, but you can expect more moves like this as China heads gets increasingly serious about being a global player in the automaking world.
Reverse: Going Out In Style
Neutral: Any Weekend Plans?
I was going to ask something about our orange president, but, honestly, who wants to talk about that, summer’s finally here.