Sumitomo's Richard Smallwood testifies against proposed auto parts tariffs

WASHINGTON—Imposing tariffs on imported auto parts would harm rather than help the U.S. auto industry and American consumers, according to Richard Smallwood, CEO and president of Sumitomo Rubber North America Inc.

"I cannot see how Sumitomo's engagement with the U.S…could have any conceivable negative impact on national security," Smallwood said at a day-long hearing July 19 at the U.S. Department of Commerce headquarters in Washington.

Commerce Secretary Wilbur Ross said May 23 that the Trump administration had initiated an investigation of imported autos and auto parts under Section 232 of the Trade Expansion Act.

At that time, Ross said there was evidence that, for decades, imported vehicles and vehicle parts had threatened national security by eroding the U.S. auto industry.

Smallwood, however, said Sumitomo's activities in the U.S. could only be interpreted as helping the domestic auto industry.

Sumitomo employs more than 1,600 workers in seven states, Smallwood said in his testimony. It supplies tires to many auto and motorcycle manufacturers in the U.S., as well as to major retailers such as Discount Tire and Pep Boys.

Recently, Sumitomo unveiled plans to invest as much as $80 million to bring its U.S. manufacturing capacity to 15,000 tires per day by 2020, he said.

"We have transferred manufacturing capacity from non-U.S. to U.S. sites to better meet our customers' needs," he said.

Imposing Section 232 tariffs on imported auto parts would create one of two adverse reactions, or more likely a combination of the two, according to Smallwood. Sumitomo would have to increase the cost of its products to manufacturers and retailers, and/or face a decrease in profits.

"To the extent we can pass on those increased costs, they will be absorbed by our direct customers and passed on in higher sticker prices or retail prices to our consumers," he said.

The costs Sumitomo can't pass on will reduce the amount of funding the company has to invest in new production or hire more workers. Smallwood he was not aware of any U.S. tire manufacturer who favors Section 232 tariffs, or of any reports from the government or elsewhere that show any evidence of a national security threat caused by tires imported to the U.S.

"We do import tires from Thailand, Indonesia and Japan—all close military allies and security partners of the U.S.," he said.

Smallwood was one of 45 witnesses at the hearing. He was the only one who directly represented a tire manufacturer, though other tire makers submitted statements to the Commerce docket on tariffs. The statements from tire makers, as with those from other sources, overwhelmingly opposed the imposition of tariffs.

Among the other witnesses were representatives from the Alliance of Automobile Manufacturers, the National Automobile Dealers Association, the United Auto Workers union, the Auto Care Association, the Specialty Equipment & Market Association and the Motor & Equipment Market Association.