Why Did Trump Propose a 100-Percent Tariff on Mexican Auto Imports?

Earlier this week, Donald Trump suggested that he would impose a 100 percent tariff on select automobiles manufactured in Mexico — sending the industry into a minor tizzy.

Having done some digging into the matter, Trump only appears to be targeting Chinese vehicles being manufactured south of the border. The statement was made during the “Buckeye Values PAC” rally in Dayton, Ohio, and comes after Chinese automaker BYD announced plans to build a production facility in Mexico. While most of the resulting vehicles are assumed to be electric, BYD has stated its intention is not to sell them within the United States.

This bold proposal was buried beneath an endless pile of news articles accusing Trump of calling for a “bloodbath” if he lost the 2024 election. However, that comment appeared to have actually pertained to the automotive industry. The former president had claimed that American automakers would be economically battered by their rivals due to the Biden EV push and increasing competition from China, and it appears he used the term to emphasize that point. This has been his position since 2020, asserting that the domestic automotive industry would suffer greatly if it blindly pursued electrification at the expense of a mixed lineup. The same, he said, was true if the United States failed to take the economic might of China seriously.

Trump previously attempted to roll back Obama-era emissions regulations and later cautioned that they were stagnating development of affordable vehicles Americans actually wanted to buy. However, any regulatory changes he made while in office were undone by executive order within the first month of Biden entering the White House.

Speculating as to why Trump would make such an aggressive proposal about tariffs, we do know that trade with China was always a major focus of his administration. The U.S. trade imbalance even shrank while he was president, due largely to his implementation of tariffs as a negotiating tactic. But a 100 percent tariff on any foreign made vehicles isn’t going to result in cheaper products or better choices for the citizenry and those were things he previously said were important to him.

One possible theory is that he wants to court the automotive union. UAW leadership is overtly aligned with Joe Biden and the DNC. President Shawn Fain even made an appearance at the State of the Union speech to be shown as an ally to the administration while he held a fist in the air. Union leadership has long been allied with the Democrats due to the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). But today’s union members are not, provided they come from labor-intensive industries.

The number of union halls for steelworkers and automotive professionals have shrunk dramatically since the 1970s and employees seem less inclined to follow leadership unquestioningly. Having spoken to loads of auto workers myself, there’s a strong sense of disillusionment after decades of the United States offshoring jobs to other countries. Union corruption has been another issue and the UAW was shown to be brimming with bad actors before its most recent change in leadership.

Fain having negotiated a juicy deal with automakers undoubtedly helped restore some level of faith in the UAW. However, Trump effectively suggesting that he might make imported automobiles more trouble than they’re worth would be a boon to those bemoaning the demise of American labor. In fact, he suggested the current domestic policies would continue to cripple labor unions during the speech in Ohio and acknowledged the dichotomy between union members and leadership — noting that he felt confident many workers would vote for him even if the top brass stayed allied to the Democrats.

“If you look at the United Auto Workers, what they’ve done to their people is horrible. They want to do this all-electric nonsense where the cars don’t go far, they cost too much, and they’re all made in China,” Trump stated during the speech. “And the head of the United Auto Workers probably never shook hands with a Republican before. They’re destroying — you know, Mexico has taken over a period of 30 years 34 percent of the automobile manufacturing in our country. Think of it. It went to Mexico. China now is building a couple of massive plants where they’re going to build the cars in Mexico and and think — they think — that they’re going to sell those cars into the United States with no tax at the border.

“If you’re listening, President Xi, you and I are friends. But he understands the way I deal. Those big monster car manufacturing plants that you’re building in Mexico right now, and think you’re going to get that and not hire Americans, and you’re going to sell the cars to us — No. We’re going to put a 100-percent tariff on every single car that comes across the line and you’re not going to be able to sell those cars if I get elected. Now, if I don’t get elected, it’s going to be a bloodbath for the whole — that’s going to be the least of it — it’s going to be a bloodbath for the whole country.”

If your favorite automobiles all happen to be manufactured within the country and your family finances are dependent upon local automotive manufacturing, a sizable tariff on imports offers no real downside. But your author would certainly argue that such a play would undermine Trump’s previous statements regarding maximizing consumer choices and could make one of the vehicles you might previously have been eyeballing impossible to obtain if it ever went beyond its Chinese focus.

Anyone who knows Trump also knows that he tends to lead with sensational statements that represent idealized goals. Those big tariffs will presumably be walked back into something more manageable should Donald Trump win the election. That does not preclude them from having their intended effect, however, nor the possible downsides of their implementation.

One supposes that the real issue isn’t so much that Trump might end up blocking Chinese imports, but rather that the plan sets an unsavory precedent. Your author personally doesn’t care if he never has an opportunity to drive something from BYD’s current lineup. But he might feel differently were those tariffs extended to other brands, assuming they were viewed as the next colossal threat. It would likewise be hypocritical for me to be critical to condemn Biden sweeping EV policies as market manipulation and then give a pass to similar proposals suggested by the administration’s main political rival. I don’t even like the Chicken Tax or modern safety regulations, though you may find yourself more willing to acquiesce to industrial regulations.

It’s likewise unclear exactly how the government would exclude Chinese automobiles produced in Mexico and not cause trouble for brands already established on the U.S. market that also build there. The 100-percent importation tax would arguably go against Trump’s own United States-Mexico-Canada Agreement (USMCA). There are a lot of unanswered questions about how barring China entry would function without creating obstacles for the industry at large. This will be something worth tracking as the election draws closer.

[Image: Evan El-Amin/Shutterstock.com]

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