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Analysis: Auto Industry Bracing for Potentially Painful Fallout from Tariffs

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Sept. 19, 2018—President Donald Trump could upend the automotive sector with new tariffs on vehicle supplies from steel and aluminum imports, the Washington Examiner recently wrote. Trump has threatened to impose duties on all products shipped from China to the U.S., and the White House is weighing a separate 25 percent tax on cars and car parts.

“Industry participants, especially the suppliers but also the vehicle manufacturers, are having to deal with pretty extreme economics that certainly weren’t in their budget at the beginning of the year,” Michael Robinet of IHS Markit told the Examiner. “This is a lot more elongated and significant than anything that we’ve seen before.”

General Motors has warned that price hikes and layoffs are likely looming if tariffs continue, and Volvo and Chinese parent company Geely delayed plans for an initial public offering because of trade uncertainty.

Manufacturers are stockpiling materials as much as possible before the tariffs take effect, and some companies are in talks about revamping entire supply chains if the trade battles continue, the Examiner reported. Though manufacturers often deal with price increases on raw materials, some experts have said Trump’s trade battles are different in the respect that much of the price increases came suddenly, with aluminum costs rising 3.6 percent to $116 per pound in June after tariffs took effect, according to data from MetalMiner.

The White House, meanwhile, has argued that the increased pressure on China and U.S. allies like Canada will inspire new trade deals that reignite American manufacturing.

To read the full Examiner article, click here.

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