For several months, President Trump has been threatening to impose tariffs on automotive imports. For instance, he tweeted in June that the administration would place a 20 percent tariff on European cars if the EU didn’t make concessions, and he implied in April and again in September that the United States should impose a 25 percent tariff on Chinese cars. The president’s concern may be based on the fact that the United States has lost global market share in automobile production. However, this fails to consider the direction that the auto industry is moving and the implications of that trend for U.S. competitiveness.
The automobile industry and the tech industry both are increasingly focused on developing connected and autonomous vehicles (CAVs)—trucks and cars that integrate information and communication technologies into their systems to assist drivers, and cars that can operate with little or no driver input, respectively. As IT hardware and software become more integral to vehicles, the United States appears to be regaining competitive advantage, with both U.S. automobile companies and U.S. tech companies investing in developing CAVs.
Rather than impose tariffs, Congress and the Trump administration should continue strengthening U.S. leadership in CAVs by adopting a more robust set of innovation policies. Specifically the federal government should:
- Continue to ensure that the U.S. regulatory system tilts toward experimentation, testing, and deployment of AVs.
- Expand the research and development tax credit.
- Do more to ensure that companies in the United States have access to a world-class engineering and computer science workforce.
- Do more to support industry cooperative, precompetitive R&D, including the CAVs.