GM's warning on US tariffs 'smoke and mirrors', says White House trade adviser Peter Navarro

American car company GM was joined by German automaker BMW in urging the US not to impose tariffs on car imports.
American car company GM was joined by German automaker BMW in urging the US not to impose tariffs on car imports.PHOTO: REUTERS

WASHINGTON (BLOOMBERG) - BMW is the latest company to urge the United States not to impose tariffs on auto imports, joining General Motors in pressing its case to Commerce Secretary Wilbur Ross, even as a top aide to President Donald Trump dismissed the concerns as "smoke and mirrors".

"It seems that the threat to impose these sanctions is designed to achieve certain goals," the newspaper Welt am Sonntag reported, citing a copy of BMW's letter to Mr Ross.

The Munich-based luxury automaker said its investment of almost US$9 billion (S$12 billion) in the Spartanburg, South Carolina, BMW plant, supports more than 120,000 US jobs.

GM's stern warning to the Trump administration last Friday (June 29) said that US operations could shrink and jobs could be cut if tariffs are broadly applied to imported vehicles and auto parts.

"Increased import tariffs could lead to a smaller GM, a reduced presence at home and risk less - not more - US jobs," the nation's largest automaker said in comments submitted last Friday to the Commerce Department, which Mr Ross leads.

That such a blunt statement came from GM - a company run by chief executive Mary Barra, whose normal tack is to avoid the political fray and let trade groups address the president's policies - was surprising to industry observers. And it underscored how high she, and many industrial leaders, believe the stakes are as the president sinks the US into tit-for-tat trade squabbles across the globe.

GM's public pronouncement follows similar moves by Harley-Davidson, Toyota Motor, and and Daimler.

The "comment suggests how severe the impact would be to GM, its employees and consumers", said Ms Michelle Krebs, analyst with AutoTrader.com. "There is a lot at stake for GM, the auto industry and the overall economy."

White House trade adviser Peter Navarro shot back at GM on Saturday in an interview on CNN, saying the auto company was using "smoke and mirrors" to deceive the public. He said the impact of tariffs on the price of a GM car was equivalent to "a luxury floor mat".

"Even the GM cars built here, about half the content is foreign," Mr Navarro said, adding that US factories had become assembly plants stitching together components made elsewhere.

In the case of BMW's massive South Carolina operation, that would be about 1,900 vehicles each day, many of which are exported.

Mr Navarro added that Mr Trump, having passed a tax cut that helps companies like GM and Harley, "felt betrayed" when they then threatened to move production jobs outside the United States in response to the retaliatory actions of foreign countries to Mr Trump's tariffs.

That echoed a tweet from Mr Trump last Wednesday directed at Harley-Davidson: "I've done so much for you, and then this."

Mr Trump ordered an investigation of whether auto imports pose national security risks last month under a section of the same 1960s trade law used to impose levies on steel and aluminium. The administration is said to be considering auto tariffs of as much as 25 per cent.

Mr Trump told reporters aboard Air Force One last Friday afternoon that he expected the Commerce Department to complete the investigation "in three or four weeks".

Under the trade statute, Mr Ross has until February to conclude the inquiry. But people familiar with the matter said Mr Trump wants the investigation to be finished before the mid-term elections in November so he can use the tariffs to his political advantage.

The probe has raised alarm among manufacturers, parts suppliers and auto retailers because all major carmakers - including GM and Ford Motor - import a substantial share of the vehicles they sell in the US from other countries.

Levies on parts also would have major implications for top models like the Ford F-150 pickup and Toyota Camry sedan by boosting prices by thousands of dollars.

GM's message came as a surprise because the company has kept close contact with the Trump administration, Mr James Albertine, analyst with Consumer's Edge Research told Bloomberg TV.

"So this came as a little bit of a shock to us, as we thought they were working more along the lines of making sure the administration knows the severity of the impact tariffs would have," he said.

Ms Barra had earlier tried to stay on good terms with Mr Trump. She continued to serve on his Strategic and Policy Forum even after many other CEOs, such as Walt Disney's Bob Iger and Tesla's Elon Musk, quit to protest Mr Trump's withdrawal from the Paris climate agreement last year. The forum was disbanded in August following Mr Trump's tepid response to attacks by white supremacists in Charlottesville, Virginia.

Now, the Detroit-based maker of Chevrolet, Cadillac, Buick and GMC vehicles is warning that additional tariffs - on top of those recently slapped on steel, aluminium and Chinese products - could hurt GM and ultimately its customers. Higher prices would crimp sales, particularly to less-affluent consumers, and reduce the number of factory workers needed, it said.

If GM were to try to absorb the additional costs, it would have less money to invest in popular vehicles that sustain manufacturing jobs, or towards pivotal technologies including electric and self-driving cars.

"The threat of steep tariffs on vehicle and auto component imports risks undermining GM's competitiveness against foreign auto producers by erecting broad brush trade barriers that increase our global costs, remove a key means of competing with manufacturers in lower-wage countries, and promote a trade environment in which we could be retaliated against in other markets," the company said.

GM's Chevrolet Silverado pickup was the top-selling model imported from Mexico last year, while the Chevrolet Equinox crossover was the leading vehicle sourced from Canada, according to LMC Automotive.

Just last week, GM announced plans to bring back the Chevy Blazer SUV later this year. The iconic American brand will be built at a plant in Mexico, a move that sparked angry comments from the United Auto Workers union. In its response, the UAW said that GM sells 80 per cent of its Mexican-made vehicles in the U.S.

"GM imports a lot of pickup trucks from Mexico, so it's a huge issue," Mr Alan Baum, an auto analyst in West Bloomfield, Michigan, said. "And for parts, it's not just GM. Everyone imports a lot of electronics from Asia. Those are are high-value parts."