The news of Trump’s tariffs on steel and aluminum — 25 percent on the former, 10 percent on the latter — is reverberating around the automotive world. At last week’s Geneva auto show, the entire European auto industry seemed to be up in arms.
“Everybody would lose,” Volvo CEO Hakan Samuelsson told Automotive News. “This includes Volvo because our whole system is based on free trade. And the consumers would lose out because they will have more expensive goods, including cars.”
What everyone is worried about is that the European Union’s decsion that it would retaliate to Trump’s tariffs with a tax on imported Harley-Davidsons would cause The Donald to enact a “tax on their cars.” For the record, while the US places a 2.5 percent tariff on imported European cars, the EU exacts a 10 percent tariff on US cars.
PSA CEO Carlos Tavares, having turned around the French automaker since leaving Renault, is worried that the tariffs will delay — or cancel — Peugeot’s plans to enter the US market. “Given our limited volume, it might have an impact on the way we go to market because, at the beginning, we would source the cars from outside the U.S.
Germany’s auto industry lobby group, VDA, puts the problem for European companies succinctly by noting that German automakers produce 800,000 vehicles in the Americas, about half of which are exported from the US. That’s also roughly equal to the number of German-made cars they import into the United States.
In other words, these automakers get punished both coming and going. The cars they produce in the US will be more expensive to produce, hurting exports, while the cars it imports could be more expensive, hurting US sales.
Meanwhile, the American Automotive Policy Council also says that the tariffs will lead to higher prices in the U.S. compared to competitors in other countries. “This would place the U.S. automotive industry, which supports more than 7 million American jobs, at a competitive disadvantage,” the AAPC said in a statement to the press.
Bloomberg also reports that Toyota Motor Corp., which plans to build a new $1.6 billion factory in Alabama with Mazda Motor Corp., said the tariffs will “adversely impact” auto companies by raising costs and prices of cars and trucks sold in the U.S.
Even auto dealers seem worried about the unintended consequences of the tariffs., Cody Lusk, president of the American International Automobile Dealers Association, noted that “These proposed tariffs on steel and aluminum imports couldn’t come at a worse time. Auto sales have flattened in recent months, and manufacturers are not prepared to absorb a sharp increase in the cost to build cars and trucks in America.”
Worse yet, according to a report — Will Steel Tariffs put U.S. Jobs at Risk? — the tariffs may not protect American jobs. According to the study, duties on steel imports enacted in 2002 by the Bush administration cost the American economy some 200,000 jobs, 14,000 of which were in the steel industry itself as production efficiencies from technological innovations in steel production outweighed the extra steel produced domestically.
As authors Lydia Cox and Kadee Russ note, “Thus, even if trade protection leads to increased domestic production, increases in employment may be far less than many hope.”
In other words, tariffs, by themselves, will not make America great again.