President Trump’s 25% tariff on imported vehicles, which came into effect last week, has already sent tremors through the automotive industry, urging businesses to halt ship cars to the US, shutting down factories in Canada and Mexico, and firing workers in Michigan and other states.
The UK-based Jaguar Land Rover said it will temporarily suspend luxury car exports to the US. Stellantis Idled Factory in Canada and Mexico fired 900 US workers who built Chrysler and Jeep vehicles and supply engines and other parts to those factories.
Volkswagen’s luxury division, Audi, has also suspended exports of cars from Europe to the US, telling dealers to sell whatever they still have on their lot.
If other car manufacturers move in the same way, the economic impact will be severe, leading to rising car prices and widespread layoffs. Auto tariffs are one of the first of several industry-specific collections Trump has in his vision, and can provide early clues as to how companies will respond to his trade policies, such as whether to raise US prices or increase manufacturing prices. The president also said he would like to tax the imports of medicines and computer chips.
Applying new tariffs on imported vehicles could increase costs to consumers by thousands of dollars and significantly reduce the demand for those vehicles. For some Jaguar Land Rover or Audi models, customs duties can be over $20,000 per car.
While many of the initial effects of tariffs were destructive, in at least one case, Trump’s obligations had the intentional impact of increasing production in the United States. Last week, General Motors said it would increase production of light trucks at its Fort Wayne, Indiana plant.
The long-term impact of the 25% tariff is unknown. Many automakers are still trying to find ways to avoid rising prices because consumers can’t afford a new car. Investors are pessimistic. Stocks of Ford Motor, GM and Tesla have declined in trading over the past few days.
“Everyone in the automotive supply chain is focused on what they can do to minimize the impact of tariffs on their balance sheets and prices,” said Kevin Roberts, director of Economic and Market Information at Cargurus, an online shopping site.
However, automakers have never had to sign such high tariff levys with such little notice. Analysts and dealers also had little insight into what the president would do next.
Source: www.nytimes.com
