Automotive Newswire from BRG Townsend, Inc. reports that President Bush’s decision to impose tariffs on steel imports from non-NAFTA regions of the world is likely to have several affects on the automotive industry, both in the U.S. and elsewhere.


The news agency says that some of those implications could turn out to be significant.


Most analysts are already forecasting that the tariffs are likely to result in higher steel prices for sheet steel and steel used in machine tools, both of which will increase the cost of producing a passenger vehicle in the United States. However, the trade action could also create a flood of cheap steel in Europe and Asia where the net effect would be to reduce the cost of building a car outside the United States. Thus, while the U.S. steel industry could win on this deal, automakers stand to lose as foreign-made cars would become more competitive.


The three-year long tariffs on steel aside, the U.S. is waging a virtual trade war with European and Asian countries on other products that range from bananas to tools and dies. For instance, the U.S. International Trade Commission (ITC) is now conducting an investigation on the current competitive conditions of injection molds imported into the U.S. U.S. tool makers claim that foreign producers, especially China, are “dumping” low priced moulds into the U.S. market.


The President’s actions, while helpful to the U.S. steel industry, could create more trade rifts. Additionally, if steel prices do rise significantly, we might see a more aggressive effort by U.S. automakers to look for substitute materials like plastic or aluminium.