Analysts have criticised US president Trump’s plans to impose up to 25% tariffs on metal products imported into the US although there have been hints the final rate may yet be varied or abolished for US NAFTA partners and countries the US deems “allies”.
Charlie Chesbrough, senior economist for Cox Automotive said: The new tariff plan signed today at the White House appears to lack a clear, long-term direction for trade strategy, which is a big problem for the automotive industry.
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“With long lead times for product and supply chain development, the auto industry struggles to strategically adjust to unclear taxes and tariffs except with price increases.
“A likely result from these new steel and aluminium tariffs is that costs will increase throughout the supply chain, driven by higher raw material prices.
“With demand at high levels already, it’s likely suppliers will pass their higher costs up the chain, and eventually to car buyers. Alternatively, suppliers may have to absorb the higher input prices by cutting their own costs – generally, neither outcome is good for the industry.”
Michelle Krebs, executive analyst for Autotrader added: “Automakers would probably pass at least some of their higher steel and aluminium costs to the consumers [Toyota has already warned of this]. That would be on top of rising interest rates that are pushing auto loan costs up. Already, affordability is a significant issue for consumers with many locked out of the new car market altogether. A double whammy price increase likely would hurt new car sales, which have been heading downward since the record year of 2016.”
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By GlobalDataThe New York Times noted Trump had defied opposition from his own party and protests from overseas as he signed orders on Thursday (8 March) imposing stiff and sweeping new tariffs on imported steel and aluminium. But he sought to soften the impact on the US’ closest allies with a more flexible plan than originally envisioned.
According to the paper: “After a week of furious lobbying and a burst of last-minute internal debates and confusion, Trump agreed to exempt, for now, Canada and Mexico, and held out the possibility of later excluding allies like Australia. But foreign leaders warned of a trade war that could escalate to other industries and take aim at American goods.”
“The actions we are taking today are not a matter of choice; they are a matter of necessity for our security,” Trump said in a ceremony at the White House where he officially authorised the tariffs, which will go into effect in 15 days.
Flanked by a handful of steel and aluminium workers, some wearing coveralls and holding hard hats, Trump presented the move as a way to rebuild vital industries decimated by foreign competition. “Our factories were left to rot and to rust all over the place; thriving communities turned into ghost towns,” he said. “That betrayal is now over.”
A longtime critic of globalisation, Trump argued the US had been ravaged by unfair trading partners.
The New York Times said business groups had warned the effect could be felt across the global supply network as consumers face higher prices for automobiles, appliances and other goods. But Trump’s aides dismissed such predictions as “fake news” and said most Americans would hardly notice any impact.
The US is the largest steel importer in the world and the order could hit South Korea, China, Japan, Germany, Turkey and Brazil the hardest. Trump said his tariff orders were tailored to give him the authority to raise or lower levies on a country-by-country basis and add or take countries off the list as he deemed appropriate.
“This has certainly put the fear of God in America’s trading partners,” Eswar Prasad, a professor of international trade at Cornell University, told the New York Times. The tariffs disprove the notion that Congress and broader business interests would prevent the Trump administration from turning its saber-rattling into real sanctions, Prasad added. “The day has actually come when real trade sanctions are on the board.”
Officials from Canada and Mexico have said they will not be bullied into accepting a Nafta deal that could disadvantage their countries, the report noted.
Chrystia Freeland, Canada’s foreign minister, called the initial exemption a “step forward” but said it would not change Canada’s negotiating approach to NAFTA. In a statement cited by the NYT, Mexico said those talks would not be subject to conditions outside the negotiating process.
The report said, in language authorising the tariffs, the White House said any nation with a security relationship with the US was welcome to discuss “alternative ways to address the threatened impairment of the national security caused by imports from that country”. Those talks could result in the tariff being lifted, the order said.
Trump said Robert Lighthizer, the top US trade negotiator, would be in charge of negotiating with countries asking for exemptions in the next 15 days.
The paper said the “potential for exemptions is likely to incite a tsunami of lobbying and cajoling as foreign governments pressure the White House for a carve out that could save them from steep tariffs”.
“We look forward to educating the Trump administration on the vital role the Japanese steel industry plays in the American marketplace,” Tadaaki Yamaguchi, a steel executive and the chairman of the Japan Steel Information Center told the New York Times. “The Japanese industry is not part of the import problem but a solution.”
The paper added that Wilbur Ross, the commerce secretary, would lead a parallel process that could result in the exemption of certain products made of steel and aluminium that American companies need, but that are not manufactured domestically.
Products as varied as construction cranes and railroad ties are made with specialized steel that is not available widely, if at all, from United States manufacturers.
The paper said, in a cabinet meeting earlier in the day, Trump had singled out Australia [which exported a small number of Pontiac- and Chevrolet-badged Holden cars to the US until GM and Ford pulled the plug on local manufacture, forcing Toyota to follow as the supply chain would fold] as an example of another country that could be excluded, citing the trade surplus that the US maintains with Australia which imports more from America than it exports to the country.
The New York Times said the announced trade barriers came just hours after a group of countries signed the Trans-Pacific Partnership, a sweeping trade deal that no longer includes the US. Trump, always a fervent opponent of the deal, had officially withdrawn the US from it on his fourth day in office.
See also: Trump threatens to impose new tariffs on EU car imports
