The many ways Trump's trade disputes are affecting the auto industry

Auto-industry representatives are expected to argue during a U.S. Commerce Department hearing Thursday that President Donald Trump's proposed tariffs on auto imports would costs jobs and increase car prices.

The White House in May asked the Commerce Department to investigate whether it could use a national-security law to impose tariffs of up to 25% on imported vehicles and car parts. Mr. Trump has argued trade barriers are needed to pressure manufacturers to build more goods in the U.S. and expand factory jobs. Mr. Trump has also implemented or suggested other tariffs that could affect the auto industry.

What tariffs are already in place?

Steel & Aluminum -- The Trump administration has imposed a 25% tariff on imported steel and a 10% duty on aluminum sourced outside the U.S. About two-thirds of a U.S.-built vehicle is made of steel or aluminum, including the body panels and frames, and most of that material is supplied by U.S. producers. However, vehicles also consist of tens of thousands of parts, many of which use steel and aluminum sourced outside the U.S. For instance, foreign steel is often used for exterior trim pieces on a vehicle and electric-car motors. The levy on the foreign-sourced steel would inflate the price of such parts.

U.S.-China auto tariffs -- In May, China said it would reduce its auto-import tariff from 25% to 15% starting on July 1 in a concession to U.S. trade complaints. But just five days after it lowered the tariff, China increased it to 40% in retaliation to the Trump administration's move to impose duties on $34 billion in Chinese-made goods. Ford Motor Co. and Tesla Inc., as well as Germany's BMW AG and Mercedes-Benz maker Daimler AG -- which make sport-utility vehicles in the U.S. and ship them to China -- have been hit the hardest by the 40% tariff. These car makers say they are being forced to charge customers more, or absorb the added costs.

The White House, as part of its $34 billion in tariffs on Chinese-made goods, also imposed a 25% duty on cars built in China and shipped to the U.S. But this tariff's impact has been limited. Only General Motors Co. makes vehicles in China that it sends to the U.S. Chinese auto makers don't sell cars in the U.S., but the $34 billion in tariffs does affect car parts crucial to the auto industry supply chain such as engine components, parts suppliers say.

What other tariffs have been proposed?

A 25% tariff on U.S. auto imports -- The White House in May asked the U.S. Commerce Department to investigate whether it can use national-security grounds to impose tariffs of up to 25% on imported vehicles and car parts. About 44% of all vehicles sold in the U.S. last year were imported, according to the Center for Automotive Research in Ann Arbor, Mich. Car makers say the tariffs could increase prices on foreign-built vehicles sold in the U.S. because the higher costs would likely be passed on to the consumer. The import duty to a lesser extent could also make U.S.-built cars more expensive because many of these models use foreign-sourced car parts that would be subject to the import duty.

The Commerce Department is holding a hearing on the tariffs Thursday, and after completing an analysis, will report back to the president. Commerce Secretary Wilbur Ross has said the department plans to complete the investigation this summer, after which Mr. Trump will make a determination on whether to impose the tariff.

EU-U.S. tariffs -- In a June tweet, Mr. Trump targeted the European Union in particular for the car-import tariff, complaining of the disparity between the 2.5% tariff the U.S. currently charges for car imports and the 10% duty imposed by Europe. He didn't mention that the U.S. imposes a 25% tariff on imports of light trucks, versus Europe's 10% rate for those same vehicles.

The EU tariff would hit the German car makers the hardest, according to analysts. BMW, Daimler and Volkswagen AG combined exported more than 700,000 vehicles to the U.S. last year, or about 10% of U.S. car imports, according to the forecasting firm LMC Automotive.

"Zero-tariff" proposal between European Union and U.S. -- Germany's leading auto makers have thrown their support behind ending all import tariffs on cars shipped to and from the European Union to the U.S., according to people familiar with the matter. The plan faces significant hurdles and one of the complications would be whether a bilateral deal between the U.S. and the EU would conform with World Trade Organization rules if it didn't extend to other countries.

What other trade issues are facing the auto industry?

Nafta -- Mr. Trump has repeatedly threatened to rewrite or withdraw from the North American Free Trade Agreement, a 24-year-old pact that allows for free trade between the U.S., Canada and Mexico. Under the current Nafta requirements, car makers with assembly plants in Mexico and Canada must prove that 62.5% of the car's content is built in the Nafta zone for the vehicle to move across borders duty-free. The U.S. has proposed increasing this content requirement and wants to expand the list of parts that must be Nafta-sourced. Mr. Trump's efforts, if successful, could significantly change the manufacturing landscape for auto makers and parts suppliers that build a sizable portion of their products in Mexico and Canada and ship them into the U.S. About 24% of all cars sold in the U.S. last year were assembled in Mexico and Canada, according to LMC Automotive.

U.S. tariffs on Chinese-made goods -- The White House earlier this month threatened to impose 10% tariffs on a further $200 billion in Chinese-made goods, as part of a continuing tit-for-tat with China over trade. This latest tariff proposal would target more than hundred car parts, including everything from struts and gearboxes to windshield glass and brake pads. If imposed, a levy on these components would likely inflate costs for car manufacturers purchasing these parts to install in factory-assembled vehicles, as well as car owners who need replacement parts.