American consumers are hurting from President Trump’s myopic trade battle with China. The unclear direction of the Biden administration in resolving the costly tariffs that continue to batter the automotive aftermarket is counterproductive in smoothing the differences between the two mighty economies.
If President Biden can’t modify his predecessor’s sledgehammer policy, who, then, should we depend on to bring clarity to free trade?
When asked on September 1 about the White House plans for reevaluating the duties on nearly $360 billion on made-in-China goods, the press secretary coyly told the press, “I don’t have any timeline for you when that review will be completed.”
Fine. Explain that policy statement to the hardworking folks reliant on automotive repair services, who are dishing out more out-of-pocket expenses than ever before. Let me remind you that the pandemic unemployment benefits have expired and the states aren’t bringing them back. Many Americans don’t exactly thrive on an unlimited budget to sustain themselves, let alone paying for the enforcement of the Section 301 trade act.
Designed to penalize foreign governments that unlawfully transfer American technologies, innovations and intellectual property that hinders U.S. commerce, President Trump leveraged Section 301 by imposing tariffs of up to 25 percent on Chinese exports. For unspecified reasons, automotive replacement parts were lumped into the mix. Soon followed a similar tax slap on aluminum and steel imports—20 percent and 25 percent, respectively.
Additional tariffs on China and leaving the rest in place without reinstating the exclusions are benefiting few industries. Undeniably so, China wields significant leverage in controlling its ports and running factories, which repair shops depend on to fix automobiles. China also sells basic raw materials that American parts manufacturers require.
But make no mistake, China, or any nation that degrades U.S. commercial interests, and by extension, the aftermarket industry, should be held accountable for egregious activities.
Just to further obfuscate the key issues dividing these two countries, Team Biden turned its focus away from Section 301 to the Chinese government subsidization of its industries. Beijing has done an abysmal job giving its enterprises an edge over American companies, noted a Washington Post essay, pointing to excess waste, surplus output and unrestrained inefficiencies. China’s $1.5 billion investment, allocated to small to medium businesses spread over five years, is unlikely to crush the U.S. automotive aftermarket.
Unless the president can articulate why China’s use of subsidies now eclipses Section 301, his team needs to confront the tariff spillover effect compounded by inflationary pressures. If not, other real economic threats may overtake our nation, only to inflame corporate America’s frustration over the White House’s inability to unite the two trading partners.
A recent study by Moody’s concluded that U.S. importers pay nine times more than how much a Chinese business pays for a similar item, a mere 8 percent of the whole duty. Moody warns that “if the tariffs remain in place, pressure on U.S. retailers will likely rise, leading to a greater pass-through to consumer prices.”
Prices on nearly every product category are soaring, as overseas container rates bound for the West Coast from the Chinese ports have quadrupled. A few repair shop service writers told me that the shrinking availability of brake systems is hurting their service levels, which mirrors a firsthand observation with one regional wholesaler waiting months—not weeks— to supply its aftermarket customers. One chemical vendor declared a “candemic,” because it could not find enough aluminum to store brake cleaner solvent in the can.
Thankfully up until now, the trade groups have constantly been advocating for fair commerce and promoting the idea of using a surgical approach over the sledgehammer. Also, for prudent reasoning, the Auto Care Association, Motor & Equipment Manufacturers Association, and Gemini Shippers joined 150 trade organizers in venting their displeasure over the president’s unshapely trade relationship with the Beijing-based government.
Written in the open letter addressed to Speaker of the House Nancy Pelosi and Kevin McCarthy, Republican leader of the U.S. House over the summer, the aftermarket organizers urged them to modify the product exclusions overseen by the Office of the U.S. Trade Representative (USTR). The mechanics driving the decision-making, the petitioners argued, are flawed.
The approval process tasked by USTR disproportionality puts the industry’s manufacturers at a competitive disadvantage. With no goalposts in sight regarding the snarled-up supply chain network, auto parts makers need every competitive gain to make their products affordable, down to the neighborhood professional installer.
According to the U.S. Government Accountability Office, a non-partisan body, the USTR fails to document its process fully. How it describes its decision-making is obscure. The GAO recommends that USTR makes its own rules less arbitrary and more consistent. Right now, the burden falls onto the importer to prove how the tariffs inflicted economic hardship and that the product in demand is only available in China.
Congress must push the USTR to publicly disclose its activities over how it grants or rejects requests made by U.S. companies. Last year, the USTR denied 46,000 exemption requests because it alleged that the petitioner failed to prove the tariffs harmed them. Forcing a rewrite of the parameters is a wise step forward because the automotive aftermarket deserves a fighting chance to make the case.
Encourage the industry stakeholders to lobby Congress—or if you can speak directly with your elected official— to reform Section 301 and the related federal trade controls that are limiting international commerce. But agitating China over its subsidy plan is one battle that the industry, Congress, and the Biden team should drop. Looking inward and taking an isolationist stance will not solve the impasse. There’s a more viable substitute to awaken slow Joe’s global outlook.
The call to action is clear: push for transparency over how the USTR handles the exclusion process. What matters most is a rebalancing of trade with Beijing, not brinksmanship. This path will help the industry cross the finish line, knowing that they have the confidence to prove adverse damage or show when China is the sole outlet to buy goods. Sound foreign trade principles now rest with our elected officials to stand up for making American commerce robust again.
