Motor & Equipment Manufacturers Association Warns that a Border Adjustment Tax Could Hurt U.S. Competitiveness and Put 45,000 Jobs at Risk

By: Cindy Sebrell, csebrell@mema.org, 202-658-9487
Date: June 1, 2017

The Motor & Equipment Manufacturers Association, which represents 1000 member companies, supports tax reform initiatives that will increase American manufacturing employment without putting an integrated supply chain and jobs at risk. 

Washington, D.C. –  The Motor & Equipment Manufacturers Association (MEMA) supports tax reform that promotes U.S. manufacturing competitiveness, job growth, and productivity, however, a Border Adjustment Tax (BAT), as currently outlined in the House Republican tax reform blueprint, will not help the U.S. achieve those objectives.

According to a study MEMA recently commissioned by The Boston Consulting Group to quantify the impact a BAT would have on the motor vehicle supplier industry, the negative effects of a BAT could be immediate and cause ripple effects throughout the U.S. economy. 

Among the most alarming effects would be a significant loss in U.S. manufacturing jobs. Reduced consumer spending power would force vehicle manufacturers and their dealers to work to decrease prices by forcing costs downward on suppliers. As a result, vehicles would be “de-contented” with fewer parts, including advanced safety features and driver-assist technologies such as lane keeping functions and emergency braking systems. Supplier content per vehicle would drop 3%, impacting supplier volume and placing up to 45,000 manufacturing jobs at risk.

“President Trump 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. “We believe reforming tax rates, combined with workforce, trade, infrastructure, and technology initiatives will promote U.S. growth and innovation in the supplier industry and across the U.S. economy. But this data shows that a BAT would put a large number of jobs at immediate risk.”

The study also shows that the imposition of a BAT would increase costs for suppliers and vehicle manufacturers and result in higher vehicle prices for consumers – an average of $1,800 per vehicle – leading to a decline in vehicle sales.   

Motor vehicle component manufacturers are the largest employer of manufacturing jobs in the U.S., contributing nearly 3 percent of the U.S. gross domestic product. Suppliers directly employ more than 871,000 Americans, up 19 percent since 2012, and generate a total direct and indirect employment impact of 4.26 million jobs, up nearly 18 percent since 2012. This 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.

In January, MEMA released an important economic impact study that clearly defines the critical role motor vehicle parts suppliers play in the U.S. economy. The motor vehicle component manufacturing industry in the U.S. has experienced robust growth due to increased demand and vehicle sales. The stability and integration of the North American supply chain has been particularly beneficial to suppliers, contributing to growth in jobs and investments in the United States. MEMA supports reasonable tax reform that will allow this trend to continue.

About MEMA
The Motor & Equipment Manufacturers Association (MEMA) and its four specialized divisions comprise a leading international trade association in the fast-changing mobility industry. Representing vehicle suppliers that manufacture and remanufacture components, technologies, and systems for use in passenger cars and heavy trucks, MEMA serves as a critical bridge between high-tech capabilities in new vehicles –such as autonomous vehicles and vehicle connectivity—and the “nuts and bolts” of vehicle manufacturing. MEMA works at state, federal, and international levels to ensure that the marketplace and public policy support the development of advanced, transformative technologies that enable safer, smarter, and more efficient vehicles. MEMA’s members are represented through four divisions: Automotive Aftermarket Suppliers Association (AASA), Heavy Duty Manufacturers Association (HDMA), Motor & Equipment Remanufacturers Association (MERA), and Original Equipment Suppliers Association (OESA). For more information on how MEMA is leading transformation in the mobility industry, visit www.mema.org.

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