A Tesla Model 3 displayed at the Guangzhou Autoshow. Photo: VCG
US President Donald Trump‘s multi-year tariff war against China is facing unprecedented legal challenges and bringing potentially massive financial damage to the US government, as several US and global automakers, including Tesla and Mercedes-Benz, filed lawsuits to block what they call unlawful tariffs on their imports from China, and sought refunds with interest on what they have already paid.
Coming days after the World Trade Organization (WTO) ruled that Trump‘s tariffs on Chinese goods were against global trade rules, and less than two months before a heated presidential election, the lawsuits from four auto giants also deal a major blow to a key selling point of Trump, who has called himself a “tariff man,” and constantly boasted that his trade war with China was a political achievement, Chinese experts noted.
While the WTO‘s ruling may have carried no teeth as it was brushed off by US officials, the lawsuits could lead to serious repercussions for the Trump administration, which could encourage other firms to seek refunds of more than $63 billion they have paid under certain tariffs, experts said.
US electric carmaker Tesla was first reported to have filed a lawsuit against the US government over the tariffs on auto parts it imported from China.
In a case filed before the US Court of International Trade in New York, Tesla said the tariffs were “arbitrary, capricious, and an abuse of discretion,” and demanded that the government refund their tariffs with interest. It also listed Robert Lighthizer, the US trade representative, as a plaintiff.
Although Tesla did not specify the items they are paying duties on, the refund it is seeking involves the 25 percent tariffs on List 3, and the 7.5 percent tariff on List 4. Tesla didn‘t reply the Global Times‘ request for comment.
However, the lawsuits and their prospects could damage one of Trump‘s biggest campaign selling points, as Trump has called himself a “tariff man” and constantly boasted that the US government has gained billions of dollars from his tariffs, experts said.
As part of his reelection bid, he even promised to continue slapping tariffs on companies that move overseas, bragging that his agenda is “Made in the USA” and that foreign companies would pay the tariffs.
“If we try to understand [the tariff war through Trump‘s logic, then this could be a political achievement for him, because he kept his promise. However, this came at the expense of some US industries, businesses and consumers,” Song Guoyou, director of Fudan University‘s Center for Economic Diplomacy, told the Global Times on Thursday.
The price for automakers is among the harshest, as China has been an indispensible supplier and market for US automakers, and Trump‘s duties have left US automakers in the impossible situation of either finding cheap and quality alternatives in other countries, or increasing their costs of production, experts said.
In an earlier waiver that it required to be relieved from tariffs in 2019, Tesla said it is “unable to find another manufacturer” other than China that meets their requirements, requiring a relief on the 25 percent tariffs on some of its parts.
“Tesla heavily relies on China for its spare parts, as are other auto companies,” Cui Dongshu, secretary general of the China Passenger Car Association (CPCA), told the Global Times.
“That is why I think Trump might treat the cases with caution, especially when the US economy needs these companies‘ contributions more than ever as the COVID-19 ravages the country,” Cui said.
The US automobile industry has been beset by economic woes, including the increased production costs from the tariffs, and slumping demand during the COVID-19 crisis, leading to large layoffs. In August, more than 92,000 people lost their jobs in motor vehicles and parts manufacturing compared to the previous year, and 225,700 jobs were cut from retail in August.
Aside from being directly hit by the tariffs, higher production costs could also mean less competiveness for the automakers in the Chinese market, experts said.
As China becomes a huge consumer market, companies like Tesla have greater business opportunities in China, especially with the government policy for new-energy vehicles in place, said Bai Ming, deputy director of the international market research institute at the Chinese Academy of International Trade and Economic Cooperation.
“US automakers are under increasing pressure from competitions from other countries,” Bai said. “The sector has become more price-sensitive, and any increase in cost will drastically drag down the US brands‘ strength.”
For companies like Tesla, China has become the sole reason for its survival especially against the backdrop of the pandemic, thanks to the country‘s rapid economic recovery.
In the first half of the year, Tesla became the biggest seller of electric vehicles in China, with a 21 percent market share.
“Tesla may struggle by the year-end without the support of the Chinese market,” Cui said.