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Report on Business Magna warns automotive tariffs would ‘irreversibly harm’ U.S. as well as Canada

U.S. tariffs on vehicles and auto parts would cut jobs, raise prices for consumers and disrupt innovation that is leading to safer and more fuel-efficient automobiles, auto parts giant Magna International Inc. says.

Tariffs now being considered by the Trump administration under the national security provisions of a 1960s-era law would “irreversibly harm” workers, consumers and businesses in the United States, the Canadian parts company said in a submission to U.S. Commerce Secretary Wilbur Ross.

“Innovation, job creation and an integrated supply chain do not present a threat to the economic security of the United States,” Jim Tobin, Magna’s chief marketing officer, said in the filing, which pointed out that the auto parts industry employs 871,000 Americans, up 19 per cent from 2012.

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“The imposition of tariffs or other trade barriers on imported automobiles and/or automotive parts would weaken the U.S. economy and threaten to undermine the entire U.S. automotive industry, putting global competitiveness at risk and making the U.S. a less attractive place to invest,” Mr. Tobin said.

Magna made its submission as Canadian tariffs take effect on U.S. steel, aluminum and consumer and other goods. The Canadian tariffs are this country’s response to U.S. tariffs of 25 per cent on steel and 10 per cent and aluminum.

The trade war between the two countries, which was kicked off by the U.S. metals tariffs imposed in response to what the U.S. administration sees as Canada’s refusal to agree to the changes it seeks in the North American free trade agreement, could spread to autos and auto parts.

That would have a serious effect on Magna, which is the largest auto parts supplier in North America with more than 20,000 people and dozens of plants in each of the three NAFTA countries, as well as a supply chain that relies on duty-free trade and smoothly functioning borders.

The Aurora, Ont.-based company employs 27,125 people in 58 manufacturing operations and 13 product-development, engineering and sales offices in 11 states, Mr. Tobin said, adding that the company has created more than 8,400 jobs in the United States since 2011.

“As such, we are keenly aware of the needs of Americans,” he wrote.

He cited a Peterson Institute for International Economics report estimating that a 25-per-cent U.S. duty on imported vehicles and parts would wipe out 624,000 jobs, and see consumers pay higher prices for vehicles produced in the United States as well as those that are imported.

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Tariff-free shipment of parts and raw materials is also critical to the development of advanced fuel-efficiency and safety systems that are transforming the industry, he added.

“Limiting access to these components will increase costs in the U.S. and make other regions of the world more attractive for future investment.”

Magna’s submission echoes that of General Motors Co., which is one of Magna’s largest customers and the largest Detroit-based auto maker. GM said in its own notice to the Commerce department that tariffs would lead to job cuts and reduced investment at its U.S. operations.

The Alliance of Automobile Manufacturers, an industry lobby group that includes GM, said in its filing to the U.S. government that a 25-per-cent tariff would be a US$45-billion tax on consumers.

Germany’s BMW AG and Hyundai Motor Co. of South Korea raised similar concerns.

“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 Commerce Secretary Wilbur Ross. The Munich-based luxury automaker said its investment of almost $9 billion in the Spartanburg, South Carolina, BMW plant, supports more than 120,000 U.S. jobs.

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Hyundai said the duties would be “devastating” to the Seoul-based automaker and jeopardize its plans to expand manufacturing in the U.S. In comments to the Commerce Department, it also said weakening South Korea’s Hyundai would ultimately hurt Trump’s effort to halt North Korea’s nuclear ambitions.

Kitchener, Ont.-based Mitchell Plastics, a privately held auto parts company that has plants in Canada, the United States and Mexico, also said the tariffs on imports would harm the industry.

“I am deeply troubled by the President’s threat to levy tariffs that will affect my company and the auto industry,” Dennis Hayes, Mitchell’s director of USA Operations, said in a filing. “We will have no choice but to pass these higher costs on to our customers, increasing the price of domestic vehicles.”

Mitchell has 800 people working at plants in Michigan, Indiana and Alabama, Mr. Hayes said.

With files from Bloomberg News

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