The Trump administration’s tariff increase and tit-for-tat has left many industries questioning with auto industry group stating that the effects of it are being felt already. An insider states that the retaliation by China to tariffs has left the auto industry exports from U.S. uncompetitive.
According to a new report, it will lead to a drastic drop of 2 million car sales on annual basis. Ultimately, a loss of 715,000 jobs and steep drop of $62 million to US GDP is on the cards.
From the words of Center for Automotive Research, the most significant concern is the threatened use of trade rule. Section 232 states that foreign made cars and car parts would be taken as a threat to national security. Ultimately, it triggers a downward cycle in the industry which is already showing the signs of decline even after the rebound from Great Recession.
The increased tariffs on imported aluminum and steel has led to an increase of about $240 on the production cost of cars, trucks, and crossovers. And with the first round of China tariff addition, assembly line parts are getting costly and manufacturers have to pay more for numerous items that are used for car making.
As the second round of China tariffs is around, it will increase the taxes even more and the auto industry will struggle in manufacturing cars at reasonable price. Emerging from the last Great Recession, the first downturn is around the corner and activating section 232 is likely to be a devastating move.
According to the experts, due to the increased tariffs, one can expect an increase of about $1300 on average mass market products while the amount for luxury cars may increase up to $5800. For instance, the Toyota has made an estimate that a U.S. made camry would face an increase of about $1600 in its price.
Tumbling down the export, according to the study by CAR, the forecast shows that the 2M annual drop with recent taxes would increase for as much as $16.5 million from 2019 to 2025.
Apart from the higher costs and less sale, taking the NAFTA changes into the account, there would be other impacts too. For instance, a lot of medium sized businesses along with some small scale suppliers would be forced to go out of business as they would not be able to afford the cost of relocating back to U.S. It may lead to shortage of supplies and lack of products in assembly lines while carmakers would receive a big cut on profits.