Export Tariffs and Automotive
In March, President Trump announced 25% steel and 10% aluminum tariffs but postponed implementation for a few months. Immediately, our trade partners around the world began talking about retaliation. Canada, the biggest exporter of steel to the United States, announced that it would seek to put tariffs on the almost $13 billion U.S. exports. Our other trade partners in Europe and China have also spoken about reprisal.
Today, many Europeans companies manufacture auto parts in the southeast states including Alabama, South Carolina, and Tennessee. The manufacturing facilities provide a boost to local economies. Their parts are placed in cars for American consumers and in cars exported to China and Europe. The European Union’s Washington Delegation believes that removal of these manufacturing capabilities may cost the U.S. economy $14 billion.
The effects of the tariffs are unavoidable even by American manufacturers as almost all vehicles use imported parts. This is why even Ford opposes the tariffs. For example, a Toyota Camry made in Kentucky may cost $1,800 more with the tariffs. Toyota expects to pass the costs to consumers.
As the effects of the new tariffs trickle down, companies are starting to lower their financial forecasts, slow manufacturing, reduce hiring, and they are making changes to their supply chains. This is where auto dealers may begin to feel the impact. Lower manufacturing means fewer cars to sell. Analysts at Morgan Stanley estimate that the tariffs and actions by trade partners can impact one percent of global trade. This can amount to millions of dollars for some manufacturers. Dustin Burke of the Boston Consulting Group worries that “A manufacturer can no longer assume that the direction of trade policy is towards freer and freer trade over time.”
We will keep an eye on the effects of the tariffs and update this post as necessary.