The Motor and Equipment Manufacturers Association, the chief lobbying organization that represents automotive suppliers, has come out in opposition to the Trump administration’s plans for a border tax.
While MEMA supports tax reform, a border adjustment tax, which is a component of the current U.S. House Republican tax reform proposal, could disrupt the integrated supply chain for many companies and cause a ripple effect throughout the U.S. economy.
MEMA said the tax would increase costs for vehicle manufacturers, decrease available capital for new product development, increase consumer prices, reduce sales and potentially eliminate manufacturing jobs in America.
In addition, MEMA has engaged a leading research firm to investigate these potential effects and identify specific initiatives that will lead to a more competitive manufacturing environment and continued job growth in the U.S.
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“The President has said that he wants to increase jobs in America and put forward tax reform that is in the best interest of American businesses, consumers and workers,” said MEMA President and CEO Steve Handschuh.
“MEMA and its members are eager to work with the new administration and Congress to identify and implement tax reform that will allow our industry to continue as an economic engine for America,” he said.
Overall, MEMA said it favors the Trump administrations efforts to strengthen America’s global manufacturing competitiveness and to create more American jobs. To reach these goals, MEMA supports a simplified, more predictable tax code that would generate investment, economic growth, and job creation in the United States.
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Motor vehicle component manufacturers are the largest employer of manufacturing jobs in the U.S., contributing nearly 3% of the U.S. gross domestic product. Suppliers directly employ more than 871,000 Americans, up 19% since 2012, and generate a total direct and indirect employment impact of 4.26 million jobs, up nearly 18% since 2012.
The job growth is made possible by a highly-integrated North American supply chain that supports both the automotive makers and the companies that supply motor vehicle parts. Many suppliers located in the U.S. import and export vehicle parts and components within the North American market.
Depending on supply chain logistics, parts are often exported to be combined with other parts, then imported back to the U.S. for final vehicle assembly.
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Other companies connected to the automobile industry, notably Toyota, have also been campaigning against the border tax. Virtually every other carmaker also has come out against the border tax in one way or another, Toyota officials said privately.