GOP-Trump trade fight boils over with threat to cars

President Trump and congressional Republicans are barreling toward a showdown over auto tariffs, just the latest conflict between the president and his party on trade.

Trump has asked Commerce Secretary Wilbur Ross to investigate whether hefty tariffs, possibly as high as 25 percent, can be levied against auto imports for national security reasons.

The mere suggestion of the huge tariffs sparked an immediate backlash on Capitol Hill, as well as GOP-friendly business groups and key trading partners already unnerved by Trump on trade.

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GOP lawmakers warn the tariffs could roil the economy months before a midterm election where they are fighting to maintain control of Congress.

“I hope we can avoid getting into any kind of tariff situation,” Senate Majority Leader Mitch McConnell (R-Ky.) told Fox News. “I think all of us are hoping that all of this back and forth discussion about trade doesn’t end up leading into the implementation of tariffs or some larger trade war.”

Some senators used a closed-door lunch this week with Vice President Pence to complain about the saber-rattling.

“A handful spoke but I would say there was more than a handful interested in the topic and … sharing with the vice president, since he was there, some of those concerns,” said Sen. John Cornyn (R-Texas).

The administration would be conducting a Section 232 investigation to impose tariffs on autos. The Section 232 law, which is rarely used, allows tariffs to be placed on imports in the name of national security, but many think such concerns do not apply to imported cars.

There are “a number of members who are concerned about using national security as a cover for essentially economic protectionism,” Cornyn said.

Sen. Bob Corker (R-Tenn.) raised the issue with Secretary of State Mike Pompeo during an unrelated hearing, saying the administration is running its trade policy “too transactionally.” He called the floated auto tariffs “absolutely an abuse” of the president’s authority.

“To me [it] feels like it has more to do with domestic politics, or some other issue, and I hope that will be abandoned quickly. I think it’s dangerous and destabilizing,” said Corker, whose state is home to a Volkswagen plant.

Tariffs could shake up the state’s Senate race, which Republicans view as key to determining which party controls the chamber next year. Corker is retiring and Rep. Marsha Blackburn (R-Tenn.) and former Gov. Phil Bredesen (D) are locked in a closely watched battle heading into November.

The prospect of auto tariffs comes as Republicans are already on edge over a reported deal between Trump and Beijing to save Chinese telecommunications giant ZTE and less-than-productive talks aimed at renegotiating the North American Free Trade Agreement (NAFTA). They also come on the heels of Trump’s decision to impose steep tariffs on steel and aluminum imports for national security reasons using the same Section 232 law.

“I didn’t think aluminum and steel met the test,” said Sen. Roy Blunt (R-Mo.), a member of the GOP’s Senate leadership. “I certainly don’t think automobiles meet the test. I just don’t think it’s a national security issue.”

Sen. Jeff Flake (R-Ariz.), a vocal GOP critic of the president who is retiring after 2018, said the administration is using “national security … to enact protectionist policies.”

“When the steel and aluminum tariffs proceeded, many of us warned that other international partners would react similarly and use national security concerns to mask protectionism. Little did we know that it would be the U.S. who went back to the same ill-advised well so quickly,” Flake said in a statement.

The Trump administration is defending the move, arguing national security and economic concerns overlap when it comes to trade.

“National security is broadly defined to include the economy, to include the impact on employment, to include a very big variety of things,” Ross said on CNBC’s “Squawk Box.”

“Economic security is military security. And without economic security, you can’t have military security,” he added.

The Trump administration is using tariffs as a primary weapon to combat what it calls unfair trade treatment on U.S. products around the globe.

But the move risks alienating key business groups long considered influential allies for a Republican administration.

Thomas Donohue, the president of the U.S. Chamber of Commerce, said in a statement that the auto tariffs aren’t “about national security” but the administration trying to use trade penalties as leverage in separate, larger negotiations, such as NAFTA.

The proposal, if carried out, “would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war,” he said. “Section 232 authorities should not be abused in this way.”

Business Roundtable, a group of the nation’s top CEOs, said tariffs on auto imports “doubles down on a bad precedent for U.S. trade policy.”

“It undermines our nation’s credibility in the global community, weakens the international trading system and emboldens other countries to use ‘national security’ to limit U.S. goods and services exports to their markets,” the group said.

Cody Lusk, president and CEO of the American International Automobile Dealers Association, said while the president has made no secret of his disdain for imports, the decision to launch an investigation came as a surprise.

“No one on the autos side is clamoring for this. It’s a solution in search of a problem and a new tax on American consumers,” he said.

A possible 25 percent tariff is “not insignificant” and would hit every vehicle sold, including trucks and autos along with auto parts, Lusk said.

Trump has said he wants to boost auto production within the United States and believes U.S. automakers aren’t getting fair tariff treatment in regions such as the European Union.

During a May 11 roundtable with auto CEOs, he said “we’re working on how to build more cars in the United States.”

“We’re importing a lot of cars, and we want a lot of those cars to be made in the United States,” Trump said.

The U.S. auto industry has been cranking in recent years, selling more than 17 million cars in 2017, a slightly slower pace than the prior year.

Many foreign automakers have plants in the United States, including BMW, Volkswagen and Toyota, almost all of them in states Trump won in 2016.

Others, such as Volvo and Mazda, are either building plants or working with existing car makers to make their cars here, Lusk said.

The U.S. imported $192 billion in new passenger vehicles in 2017, according to Chad Bown, a senior fellow at the Peterson Institute for International Economics.

Mexico and Canada, members of NAFTA, combine for nearly 50 percent of all auto imports into the United States. Japan represents 21 percent, South Korea 8 percent and 2 percent come from the rest of the world.

Word of the possible tariffs sent global trading partners scrambling to understand why the administration was pursuing yet another possible batch of tariffs.

Canadian Prime Minister Justin Trudeau on Thursday slammed Trump, telling Reuters he is “trying to figure out where a possible national security connection is.”

The United Kingdom, another close U.S. ally, said it does not accept that its industry poses a threat to U.S. national security.

“International car makers support huge numbers of high-skilled jobs in the U.K., the U.S. and elsewhere,” a U.K. spokesperson said in a email to The Hill.

“We will follow this new investigation very closely. We will, as ever, be firm in standing up for the interests of U.K. industry — as we continue to do, together with EU partners, on the U.S. steel and aluminium tariffs.”

Alexander Bolton contributed