Blog: Dave LeggettFree trade

Dave Leggett | 5 December 2003

I guess there will be some sighs of relief in Detroit now that President Bush has apparently backed down in the US-EU trade dispute and removed the tariff he imposed on steel imports to the US. American vehicle makers can look forward to cheaper steel now. Why did Bush relent? Several factors seem to have come into play but my reading from what I hear is that some fairly clinical domestic political considerations probably proved decisive. Just ask yourself which way steel workers normally vote and also where the next round of a US-EU trade war would have hit (for example, citrus fruits were high up on the EU's retaliatory hit list).

One thought for the auto sector though: just how much will it help Detroit over the coming year? Steel is an important raw material of course, although I'm not sure what proportion of the wholesale vehicle price it accounts for on average. Maybe someone out there can enlighten me? (A $200-$300 per vehicle impact is one estmate - see below link.) And, I wonder, will lower steel prices mean higher margins or even lower real vehicle prices?


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