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Carmakers warn tariffs would drive up vehicle prices and cause job losses

China tariffs causing U.S. price hikes

Americans planning to buy a car this year may have to contend with pricier wheels. That's the fear of auto industry groups after the Department of Commerce on Sunday sent a report to President Trump on whether the U.S. should impose tariffs on imported cars and parts.

For now, it's not clear what those recommendations are — a spokesman for the federal agency said no details on the report would be made public, according to the Reuters news agency. But Mr. Trump has previously threatened to levy a 25 percent tariffs on foreign-made vehicles and auto parts.

The car industry and consumer groups vigorously oppose the tariffs, saying they would raise car prices and cause job losses because of declining vehicle demand.

Potential impact on vehicle prices

Mr. Trump has made rebuilding America's auto manufacturing sector a priority, claiming that tariffs would have prevented the closure of several GM plants in Ohio, Michigan and Maryland, while touting the "billions" the U.S. Treasury takes in from tariffs. 

But auto industry advocates say any new tariffs would add thousands of dollars to the price of cars and trucks, which are already pricier to produce thanks to last year's U.S. tariffs on steel and aluminum imports — and not only foreign vehicles.

U.S.-built vehicles could see their price rise by $1,900, while those of imported cars would jump $3,700, according to estimates from the Center for Automotive Research, an industry think tank, said. (The projections assume that Canada and Mexico, the two biggest car parts suppliers for the U.S., are exempt from the tariffs.)

Other major business groups also are weighing in against possible car tariffs, with the policy head of the U.S. Chamber of Commerce on Sunday calling it "a terrible idea."

Hundreds of thousands of jobs on the line

A tariff-fueled hike in car prices would dent U.S. economic growth, the Motor & Equipment Manufacturers Association says. The auto supplier trade group projects that 870,000 jobs in the auto supply chain could be affected.

"[P]roposed tariffs, if they are recommended, will put jobs at risk, impact consumers and trigger a reduction in U.S. investments that could set us back decades," the group said Monday.

The cumulative effects of tariffs on steel, aluminum and potentially auto parts could eliminate nearly 400,000 industry jobs, according to CAR. They could also make car insurance pricier by increasing the cost of a car repair, insurers warned this summer.

The industry has not fully recovered from the 2007-2009 Great Recession, the Congressional Research Service found. Some 970,000 people worked in the car industry in 2017, 20,000 fewer than did in 2007.

Car sales slowing

Meanwhile, auto manufacturers are already dealing with cooling demand for their products. Car sales in China, the world's largest market, have been dropping since August, Bloomberg reported.

Most foreign carmakers build automobiles containing U.S. parts, while American vehicles use components made overseas. In some General Motors and Ford cars, for example, more than half of the parts are manufactured abroad. sometimes more than half.

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Rachel Layne contributed to this report.