America’s oldest allies warned Thursday they could retaliate against hundreds of billions of dollars of U.S. exports if President Donald Trump imposes tariffs on imported automobiles and auto parts to protect national security.

“Should this investigation ultimately result in the application of tariffs on autos, Canada will once again be forced to respond in a proportional manner,” said Kirsten Hillman, Canada’s deputy ambassador to the U.S., at a Commerce Department hearing.


That threat was magnified by European Union Ambassador David O’Sullivan, who said the retaliation would probably hit far more American goods than countries have already targeted with import taxes in response to Trump’s new duties on steel and aluminum.

“Import restrictions resulting from the present investigation could result in countermeasures on a significantly higher volume of U.S. exports, which we estimate at $294 billion, around a fifth of total U.S. exports in 2017,” O’Sullivan said. “For its part, the EU is proceeding with internal preparations in the event the U.S. were to adopt trade-restrictive measures.”

Trump wants to start taxing imports of foreign cars prior to the midterm elections this fall, seeing it as a good political play in Rust Belt states like Michigan and Ohio. To do that, he’s relying on the same rarely used law, known as Section 232 of the 1962 Trade Expansion Act, that he used to hit steel and aluminum imports. But the planned move has drawn sharp opposition from Trump’s fellow Republicans in Congress, and it's even said to be controversial among Trump’s own advisers.

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It’s also opposed by both auto manufacturers and makers of auto parts, who warned on Thursday it would drive up the price of cars by thousands of dollars and cause the loss of anywhere from 200,000 to 600,000 jobs, depending on the extent of trade retaliation.


The American Automotive Policy Council, which represents Ford, GM and Fiat Chrysler, said its analysis showed that increased auto tariffs, combined with the higher aluminum and steel duties Trump has already imposed, would hurt, not help, the industry.

“By increasing the cost to manufacture a car, the tariffs will lead to higher vehicle prices for all automakers — foreign and domestic,” Matt Blunt, the auto group’s president, told administration officials. “These higher costs will, in turn, lead to lower demand and lower U.S. auto sales and production. Ultimately, this will lead to fewer jobs in the auto industry.”

Auto-state lawmakers, such as Sen. Doug Jones (D-Ala.) and Rep. Jackie Walorski (R-Ind.), took part Thursday in a rally on Capitol Hill to oppose higher duties on foreign cars.

Jones said at the rally that he and Sen. Lamar Alexander (R-Tenn.) would introduce legislation next week “to try to put the brakes on these tariffs because, at the end of the day, tariffs are taxes, and what the administration is trying to do today is to impose new taxes on the American people.”


Walorski on Wednesday sent Commerce Secretary Wilbur Ross a letter, signed by 149 lawmakers from both parties, urging the administration to proceed with caution in its investigation of whether imported automobiles and parts negatively affect national security.

“I agree with President Trump that we need to ensure a level playing field with America’s trading partners, but imposing costly tariffs on this vital industry does threaten our nation’s economic growth and puts our nation’s manufacturing jobs at risk,” Walorski said.

Last year, the United States imported $360 billion worth of autos and auto parts from more than a dozen countries. Mexico accounted for $116 billion, about half of that sum in parts, followed by Canada ($62 billion), Japan ($56 billion), Germany ($31 billion), South Korea ($24 billion), China ($19 billion) and the United Kingdom ($10 billion).

A forthcoming paper by the Peterson Institute for International Economics estimates that the potential new tariffs would raise car prices from $1,408 to $2,057 for a $17,000 vehicle, $2,093 to $3,066 for a $22,500 vehicle, and $4,708 to $6,972 for a $35,000 vehicle.

One of Trump's motivations for potentially imposing tariffs is to encourage more cars to be built in the United States. But many foreign brand automakers make a substantial number of cars in America, both for sale domestically and for export to third countries.

"Japanese automakers are currently manufacturing as many as 3.8 million cars in the U.S. and their exports from the U.S. to the rest of the world amount to $23 billion in value," said Kazutoshi Aikawa, deputy chief of mission at Japan's embassy in Washington. "Japanese auto and auto-related companies in total have invested over $48 billion and are creating more than 1.5 million jobs, directly or indirectly, in the U.S."

Mexican Ambassador Gerónimo Gutiérrez noted the integrated nature of North American vehicle production, where parts can cross the border many times before a car is completed. He also warned that Mexico, which is in the midst of renegotiating the NAFTA deal with the U.S. and Canada, would not tolerate the Trump administration using what Mexico considers to be a phony excuse to tax its exports to the U.S.

"Mexico stands firm against the use of a national security argument in an effort to restrict trade or gain negotiation leverage," he said. "We will remain vigilant for any unjustified trade restriction and will exercise our rights to ensure that the Mexican automotive industry is not adversely affected."


Ross, in opening remarks at the all-day hearing, sought to reassure automotive companies, industry groups and trading partners that the Trump administration has yet to make a decision as to whether to impose new tariffs.

“It’s clearly too early now to say if this investigation will ultimately result in a Section 232 recommendation on national security grounds, as we did earlier with steel and aluminum,” Ross said. “But President Trump does understand how indispensable the U.S. automobile industry is.”

Since the administration launched its investigation in late May, Trump has threatened a handful of times to impose tariffs as high as 25 percent on imported European cars specifically, despite the ongoing nature of the investigation.

But Ross said Thursday the agency will be “carefully analyzing” more than 2,300 comments it has received on the investigation before any action is taken.

In the hearing’s first panel, industry groups and government representatives noted that Commerce is also conducting extensive economic analysis and requesting detailed and sometimes sensitive information from companies on their supply chains.

Only three groups — the United Automobile Workers, the United Steelworkers and the Forging Industry Association — are on record as being in favor of the investigation, and just one of those groups, the UAW, testified on Thursday.

The union called for a “comprehensive” investigation, but also expressed concern over the negative consequences of any potential trade restrictions.

“We caution that any rash actions could have unforeseen consequences, including mass layoffs of American workers, but that doesn't mean we should do nothing," said Jennifer Kelly, UAW’s research director.


The other 44 witnesses, including 10 foreign officials, all were expected to oppose the tariffs based on statements filed with the Commerce Department before the hearing. However, some groups, such as those representing classic car enthusiasts, took a narrow stand on the investigation based on their own particular concerns.

As in the prior steel and aluminum investigations under Section 232, many longtime allies objected to the idea that their exports could pose a threat to U.S. national security.

“U.S. contingency planners have long concluded that industrial centers in Canada are an important reserve capacity for the United States in the event of attacks on U.S. cities,” Hillman said. “On this basis alone, this investigation must conclude that Canada could not conceivably represent any risk to U.S. national security.”

The allies also argued that the U.S. auto industry is not under threat of collapse from imports, but has instead steadily expanded production in the last 10 years.

“If import measures are imposed on automobile and automotive parts, the five trading partners most affected would be Canada, Mexico, the EU, Japan and South Korea,” said O’Sullivan, the EU ambassador. “The notion that imports of autos and auto parts from your closest allies could threaten U.S. national security is, bluntly speaking, absurd.”

European Commission President Jean-Claude Juncker is expected to visit the White House next week, and U.S. opponents of the duties are hoping he will bring a proposal to reduce the EU’s import tariffs on American cars that will dissuade Trump from bringing the tariff hammer down yet again.

Maria Curi and Adam Behsudi contributed to this report.