Even if it’s your full-time job, keeping up with the Trump administration’s tariff moves over the past months has been nearly impossible. Now, a report says that the rules are about to change once again. The reported changes will exempt car parts from China from the massive 145% tariff, as well as steel and aluminum, while keeping the tariffs on cars built in that country. But these parts will still be hit with the same 25% tariff applied to auto components not from the US.
At the same time, the President has threatened to raise tariffs on cars from Canada. All while automakers desperately look for not just stability but a solution that won’t bring the industry to a crashing halt that rivals the pandemic shutdowns.
Chinese Auto Parts Could Catch A Break
Yesterday, The Financial Times reported that President Trump planned to give automakers a reprieve of sorts on car parts. He would remove the so-called retaliatory tariffs on car parts as well as steel and aluminum coming from China. Those tariffs are currently set at 125 percent and are scheduled to take effect on May 3rd. Despite those exemptions, the 25 percent tariff on all foreign-built cars would remain in effect, as well as the 25 percent tariff on parts, again set for May 3rd. Several of those tariffs would have stacked, leading to massive costs for suppliers and automakers.
The news comes after six auto industry groups banded together earlier this week to ask the administration for relief. Groups representing dealers, suppliers, and automakers wrote to the Secretaries of the Treasury and Commerce, as well as to the U.S. Ambassador for Trade. They expressed concern for the entire industry, pointing out that supply chains were fragile and that the tariffs could lead to “production stoppages, layoffs, and bankruptcy.”
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Tariffs Might Kill Chevrolet’s Cheapest Vehicles
GM Korea is concerned for its survival amid the threat of a trade war, which could spell doom for the Korean-built Trax.
“It only takes the failure of one supplier to lead to a shutdown of an automaker’s production line. When this happens, as it did during the pandemic, all suppliers are impacted, and workers will lose their jobs,” the letter read. That will, as it did during the pandemic, lead to higher prices for consumers and leave some unable to find repair parts. Those increases would come on top of the increases directly attributed to tariffs.
Nearly 10 percent of all auto parts imported to the US in 2023 came from China. That’s $18 billion in auto parts, a figure nearly equal to Canada’s. Mexico is the top for parts imports at $81b, according to figures from the Automotive Aftermarket Network. US auto parts production is estimated at $92 billion per year.
Parts And Vehicles From Canada Could Get The Opposite
On Wednesday, the President said that he was working on a deal with Canada regarding tariffs, but that they could still be increased. “I put tariffs on Canada, they are paying 25 percent, but that could go up in terms of cars,” Trump said in the Oval Office.
“When we put tariffs on, all we are doing is we are saying, ‘We don’t want your cars, in all due respect.’”
Trump said he did not want Canada to have a part in the US auto industry, claiming the country was taking its vehicle business. Trump’s own CUSMA agreement builds on decades of free trade between Canada, Mexico, and the US, with the auto industry playing a significant role. Prior to the current trade war, the border crossing between Windsor, Ontario, and Detroit, Michigan was the busiest in North America, handling approximately $365 billion in trade annually. With a close-knit network of suppliers on both sides, auto parts can cross multiple times before ending up in a completed car.
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The Car Brands Most At Risk From Trump’s Huge Tariffs
Tariffs are nothing new in the automotive world, but for some brands, their American dream could go up in smoke.
The Center for Automotive Research said earlier this month that a 25 percent tariff would lead to $107.7 billion in extra costs to all US automakers, including $41.9 billion in extra costs to the “Detroit Three.” That would equate to roughly $6,774 in extra costs per new vehicle sold in the US based on last year’s sales figures. Such increases could lead to the discontinuation of lower-priced models, driving prices even higher for American buyers.
Sources: Financial Times, CNBC
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