Trump’s tariffs on Canada and Mexico would hurt the automotive industry: NPR

A car transport carries the Toyota RAV4 vehicles when it goes in to cross the ambassador bridge in Windsor, Ontario to go to Detroit, Michigan on February 3rd.

Jeff Kowalsky/AFP via Getty Images

Hide caption

Change caption

Jeff Kowalsky/AFP via Getty Images

President Trump has promised to set 25% tariffs on Mexico and Canada – unless they beat deals with him to cut down on immigration and drug trafficking, or otherwise give the United States what Trump considers a “victory.” Both countries have now negotiated One month postponement from the tariffs.

Trump has called “Customs” the most beautiful word in the English language but for many American companies, these Special tariffs are an ugly view.

Canada and Mexico are crucial trading partners. In particular, the automotive industry has looked anxious after updates. Car manufacturers have built a huge, complicated supply chain that spans North America, with parts crossing back and forth across borders throughout the car production process.

“I think everyone understands that Mexico, USA and Canada are very integrated,” said Irina IM, a senior analyst at RSM Canada, in December. “It’s hard to imagine how this supply chain that has been built over a long time can be disturbed.”

Tariffs would, of course, greatly raise the cost of vehicles imported from Mexico, such as Toyota Tacoma or Canada, as Chrysler Pacifica. But it would also raise prices for vehicles gathered in the United States because many of their parts come from companies in Canada or Mexico. Some parts cross several times – such as seat.

This border -hoping supply network was supported by trade agreements such as NAFTAAs Trump abolished, and its replacement USMCAAs Trump signed. And Detroit 3-the US-based carmakers who have significant operations in the US’s closest neighbors-Ville be particularly vulnerable to cost increases.

Analysts at Bernstein Research estimate that 25% duties in both countries would be a headwind of up to $ 110 million per year. Day for the automotive industry, which harms Detroit 3 disproportionate. Analysts in Jefferies, an investment bank, projecting that it would add approx. 6%or $ 2,700 at the average US vehicle prices for car buyers.

“We urge all parties to reach a quick decision to provide clarity and stability for the entire US automotive industry,” Jennifer Safavian, president and CEO of Autos Drive America, said a trading group representing international car manufacturers in a statement on Saturday. Alliance for Automotive Innovation, the group representing US car making, noted that “trouble -free” trade in North America supports a $ 300 billion industry.

Mema, a trading group that represents companies that manufacture car parts and components, wrote in a memo on January 31 that the tariffs “would have serious consequences” for suppliers, workers and consumers.

On Monday, Trump spoke with the leaders of both Mexico and Canada and announced that no country would immediately be subject to customs when negotiations continue.

But he also rejected concern about the financial effects if tariffs were introduced, and tells journalists on Monday that the United States is not dependent on Canada. “We don’t need them to make our cars,” he said.

A significant challenge for car manufacturers – and their surrounding ecosystem of suppliers, dealers and workshops – has always said that these special tariffs are intended to motivate political changes and are not intended to be permanent. In contrast to some long -term tariffs for China, it is intended to help us companies compete with subsidized Chinese rivals or the prospect of widespread, across the tariffs intended to raise revenue for the federal government.

When tariffs are expected to hang, car manufacturers may be willing to make significant investments to avoid them, such as moving where a vehicle is manufactured, or building new supplier conditions. But if a duty will only be in place short (or never move beyond a threat), it does not make no sense.

Mary Barra, CEO of General Motors, approached this conundrum in a call with investors last week. The company is prepared to take “no costs or low cost” actions to mitigate the battles of the customs, she said. (She did not specify but one option would be to store some parts in advance or use existing supplier conditions to the source as much as possible from the US instead of other countries.)

“What we don’t want to do is use a large amount of capital without clarity,” she said.

And from Monday afternoon, clarity was in short supply.