Washington — The head of an Oakland County auto supplier producing door hinges for Jeep Wranglers says proposed tariffs on Chinese goods will result in a tax on 90 percent of her business, symbolizing growing resistance to the Trump administration’s trade policy push.
Mary Buchzeiger, CEO of Auburn Hills-based Lucerne International, told officials from the U.S. Trade Representative’s office at a hearing Tuesday that plans to slap a 25 percent tariff on zinc hinges and base-metal parts for vehicles would imperil her company because its parts are built with materials that originate in China and Taiwan.
“We produce all the hinges for the Jeep Wrangler,” said Buchzeiger, a self-described Republican voter who is one of 123 people scheduled to testify. “We’ve been producing the door and hood hinges since 2005. We were recently awarded the next-generation contract. We have 28 parts on every four-door vehicle rolling off the assembly line in Toledo. This business amounts to roughly $30 million of annual revenue.”
Buchzeiger is just one of a growing number of business leaders from around the country lining up to voice opposition to the administration’s plan to levy tariffs on Chinese goods. So intense is the pushback from business that the U.S. Trade Representative — which received more than 2,700 comments on the proposal — extended the hearing to Thursday.
The Trump administration is considering slapping tariffs on $50 billion worth of Chinese imports, citing an “out of control” trade deficit after a months-long investigation into intellectual property theft. The U.S. trade deficit with China grew 12 percent last year to $566 billion.
“We have long worked with multiple administrations on the protection of intellectual property in China,” said Ann Wilson, the senior vice president of government affairs of the Motor and Equipment Manufacturers Association set to testify before the USTR on Wednesday. “We think the imposition of these tariffs will have unintended consequences and they’re not the right tool to address these IP issues.”
That’s not the only problem. For Buchzeiger, the process of making those hinges “starts overseas” at facilities in China and Taiwan, where “seven long-term, strategic manufacturing partners” produce the hinges. “They are then shipped to my plant in Auburn Hills, inspected and repackaged and then sent to another plant located in Milan, Michigan, where they are assembled before being shipped to the Jeep assembly plant in Toledo.”
Buchzeiger is not alone. The vice president of Atlanta-based Rheem Manufacturing Co.’s air conditioning division, Mike Branson, warned against placing tariffs on air conditioning parts manufactured in China — but not finished units built there.
“If our inputs are subjects to tariffs, but the finished air conditioners made by our Chinese competitors are not,” he said, “air conditioners produced by Chinese manufacturers would have a cost advantage, and there would be further disruptions to the remainder of the U.S. industry. It creates an incentive for Chinese manufacturers to shift more production downstream.”
Buchzeiger, who employs 40 in Auburn Hills, said she is proud of the fact that her company’s products are manufactured in Asia. She said there are no U.S. companies capable of doing the same type of work.
Her business cannot withstand paying a 25 percent tariff on every Wrangler hinge it produces, she said, predicting her Asian partners would pass the cost of the tariff on to her. That would force her to raise prices for Jeep and other auto manufacturers who will then turn to foreign suppliers not subject to the tariffs.
Her expected annual hit: $7 million, which is why plans to grow her Michigan workforce 25 percent likely are on hold until business leaders like her gain more clarity about the impact of would-be Trump tariffs.
“I can’t swallow these costs. I don’t have that kind of margin in the program. I will essentially be forced out of business,” she said. “Make no mistake: This duty aimed at Asian companies is effectively a 25 percent tax on my company. ... And I resent it. I’m angry, I’m frustrated, and honestly, I’m scared.”
The tariff proposal contradicts previous Trump administration pledges to boost the number of jobs that are “reshored” to the U.S., Wilson said, particularly when it threatens companies like Buchzeiger’s who use materials from China to build parts in the United States.
Charlie Chesbrough, senior economist and senior director of industry insights for Cox Automotive, said the tariff proposal has added “a tremendous amount of uncertainty to the supply chain” for auto parts, noting that automakers typically have a long lead time for design changes and rolling out new models.
“It’s going to be very difficult for the industry to do any sort of changes to suppliers,” he said. “Manufacturers will just have to pass along the additional costs, because of the long lead time, but also because they don’t know how long this new policy is going to be in effect. Does it change in 2020 if there’s a new administration? Does it change if President Trump changes his mind later?”
The proposed tariffs are likely to ripple across the auto industry, affecting both new-car prices and the cost of repairing older models. More, they could impact the very industries whose employees in the industrial heartland helped Trump win the White House.
“Vehicle purchases are likely to cost more money, the cost to repair is going to cost more,” he said. “Other expenditures will also be going up, such as food. It’s not just the expenditures on autos, but your whole wallet that is going to get squeezed.”