Tariff hikes could be ‘real shock to the system’ for the thriving US auto industry, CEO says

FAN Editor

Potential tariffs are the greatest threat to the auto industry in the U.S., the CEO of a Washington-based automobile trade association told CNBC on Wednesday.

That warning comes as President Donald Trump has threatened many of America’s major trading partners with tariffs — and they’ve responded in kind. Still, Global Automakers President and CEO John Bozzella emphasized that the industry is in a healthy place at present.

“There is no question the U.S. auto industry is thriving: We are at or near record levels with regard to sales, also with regard to auto production and auto exports to countries all around the world,” he said. “So we have a really nice run going, and we’re very concerned that tariffs would put an end to that.”

Tariff hikes, he warned, would raise prices, make it more expensive to produce cars and trucks in the United States, and “they will certainly invite retaliation from our trading partners.”

“It could be a real shock to the system,” he told CNBC’s Dan Murphy.

Bozzella said the tariffs could cause a slow down in sales and production, which would not be good for either American consumers or autoworkers

The United States has imposed tariffs on European steel and aluminium imports in recent months and is conducting another national security study that could lead to tariffs on imports of cars and car parts. Both sets of tariffs would be based on concerns about U.S. national security.

Major U.S. trading partners including the European Union, China and Japan voiced concern at the World Trade Organization on Tuesday about the possibility of such U.S. measures on imported autos and parts. Japan warned that could trigger a spiral of counter-measures and result in the collapse of the rules-based multilateral trading system, an official who attended the meeting told Reuters.

Bozzella told CNBC that imposing “tit-for-tat” tariffs on major trading partners like Europe was a poor way for the U.S. to cope with its trade deficits in the auto industry.

Instead, he suggested, the U.S. should engage in more trade and trade agreements with other countries to boost american exports and domestic consumption.

As most American-made vehicles rely on foreign parts, a hike in tariffs could cause domestic automakers to pass increased production costs to consumers, causing an increase in the prices of American cars both globally and domestically.

—Reuters contributed to this report.

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