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Effects of additional tariffs on imports to the USA of motor vehicles and motor vehicle components

2019-11-07

In a new report, the government agency the National Board of Trade Sweden, analyses the potential economic effects for Sweden, Germany, other EU countries, the United States and Japan if the United States would impose extra tariffs on imports of motor vehicles from the EU and Japan.

Portrait photo of Petter StålenheimPetter Stålenheim, senior adviser at the National Board of Trade, you have written the report. Why did the National Board of Trade look into this topic?
– In May this year, the US president Trump announced that imports of passenger cars and car parts poses a security threat to the United States. He deems it important for the country's military capability to have a sufficient domestic production of motor vehicles. The US Trade Representative now has the task to negotiate with the EU and Japan to come up with an agreement to reduce US motor vehicle imports from these parties. If an agreement cannot be reached, president Trump has announced that the United States will impose additional tariffs of 25 percentage points on top of current tariffs on passenger cars and car parts. By mid-November, there will be a report on the progress of the negotiations.

The main conclusions of the study are that vehicle exports to the US, from the countries concerned, would be significantly lower with additional tariffs of 25 percentage points, on top of already existing US import duties. Sweden's exports of motor vehicles and vehicle components to the US would be 36 per cent lower with the additional duties. Vehicle exports from Germany, other EU countries and Japan would also be significantly lower, between 34 and 36 per cent.

US imports of motor vehicles and vehicle components would not be drastically lower. Instead, imports would be diverted to primarily Canada and Mexico. Their joint vehicle exports to the United States would be 22 per cent higher if the United States imposed import duties on the EU and Japan.

The effect of the US extra tariff on the economy as a whole would be more limited for all countries concerned. While Sweden's, Germany's, the rest of the EU's and Japan's GDP would be between 0.004 and 0.011 per cent lower with tariffs, the United States would be the country whose GDP would be affected the most. US GDP would be 0.015 per cent, or SEK 27 billions, lower, if the US imposed additional tariffs of 25 percentage points on imports of motor vehicles from the EU and Japan.

Table: Total exports and imports, precentage difference to the reference scenario
Click on the picture for a larger version

The analysis is done by simulation in the OECD METRO modelling tool.

The report
Effekter av tilläggstullar på import till USA av motorfordon och fordonskomponenter (only available in Swedish)

Contact
Petter Stålenheim
e-mail: petter.st...@kommers.se
phone: +46 8-690 48 49

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National Board of Trade, P.O. Box 6803, SE-113 86 Stockholm. 
Visiting Address: Drottninggatan 89. 
Phone: +46 8 690 48 00     Fax: +46 8 30 67 59

E-mail: kommersk...@kommers.se

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