On the Feasibility, by Means of Customs Duties, of an Entirely (or Almost Entirely) Made-in-the-USA Automobile

One of the objectives of the Trump administration’s economic policy is to revitalize the American industrial fabric and create a large number of high-paying blue-collar jobs. However, the main instrument used to achieve this goal – tariff protection – is a point of contention. We discuss the relevance of the recently introduced policy for an emblematic sector: the automotive industry. The latter operates highly integrated production chains where intermediate products frequently cross borders to circulate within a ‘Big Factory’ encompassing production sites located mainly in Mexico, Canada, and the USA, but also in other countries. The imposition of a 25% tariff on finished cars and their parts could lead to significant disruptions for consumers and producers alike. The lessons learned from the automotive sector retain much of their relevance for other areas of the US economy. In the absence of a nationwide adequate solution, the lot of displaced workers could be improved through place-based workforce transition programmes limited to disadvantaged areas. Industrial policy measures targeting disadvantaged communities and regions could also be envisaged. In this case, however, it would be necessary to deploy a variety of instruments adapted to the circumstances and to take into account, as far as possible, the interests of trading partners in order to avoid conflicts.