President Donald Trump’s tariffs could have a major impact on manufacturers and those in the auto industry. Warnings from industry leaders say tariffs, like those on imported cars and car parts could do far more damage to the U.S. economy than good. Is this the economy Trump had in mind to make America great again?
Auto Industry Giants and Manufacturers Warn President Trump
Recently industry groups in the auto industry, issued warnings about the Trump tariffs to the U.S. Commerce Department, which is presently looking into the proposed tariffs, and if they relate to auto imports.
For example, General Motors (GM) gave the Trump camp an ear full, strongly advising against the tariffs. The reason behind the harsh warning by GM is a potential loss of operations in America, as well as layoffs and higher unemployment rate.
GM is the number one automaker in the U.S. with nearly 50 manufacturing plants, 25 service facilities for parts, and over 100,000 people on their payroll. General Motors issued a statement saying:
“The threat of steep tariffs on vehicle and auto component imports risks undermining GM’s competitiveness against foreign auto producers by erecting broad-brush trade barriers that increase our global costs, remove a key means of competing with manufacturers in lower-wage countries, and promote a trade environment in which we could be retaliated against in other markets.”
President Trump Revoked Exemption for Industry Allies Canada, Mexico, and the European Union
President Trump announced the tariffs earlier this year, covering steel and aluminum imports. There were concessions made to our neighbors to the North, Canada, and our to the south, Mexico. The European Union (EU) was bundled into a temporary exemption as well.
But this exemption didn’t last, like most of what the business-minded president tweets about, going back on the exemption and levying a 25 percent tariff on steel and 10 percent tariff on aluminum for our close industry allies.
Why? National security was the explanation for the tariffs under Section 232 laws, a not so common law to leverage, and the tariff war continues. Could these tariffs really be in the interest of national security? What’s the endgame for the Trump administration?
U.S. Chamber of Commerce Gives Scolding to Trump Camp
The tariff plan was met with much backlash, especially from the U.S. Chamber of Commerce. They warned that if the tariffs went into full swing it would be worse for the security of the country due to a possible trade war.
“The Chamber, the nation’s largest business lobbying group and a traditional ally of Trump’s Republican Party, said the White House is risking a global trade war with its push to protect U.S. industry and workers with tariffs,” Ginger Gibson of Reuters explained.
Those backing the auto industry, many of which are republicans aren’t aligned with Trump’s proposed tariffs either. The National Foreign Trade Council (NFTC) even spoke out against the move noting that the tariffs would raise manufacturing costs and make cars more expensive for consumers.
What this Really Means for U.S. Manufacturers
The tariffs could possibly make U.S. manufacturing of cars in America impossible. This is not good, and certainly not a way to make America “great again.” After all, the U.S. was in some ways built on the back of the auto industry.
Auto part manufacturers will also feel the pain. Production costs will increase, and the costs will snowball to car manufacturers and then consumers. It is a snake eating the tail issue that Trump may not fully understand.
Those jumping into the manufacturing business, especially in the space of auto parts, be ready for raw material costs to go up significantly. That’s the bad news. The somewhat good news is that there are ways to mitigate those inflated costs on steel and aluminum.
For example, cutting your manufacturing budget. This could be moving your factory, or part of your factory to a cheaper location. You can also save by buying used manufacturing equipment rather than buying new. Used manufacturing equipment is valuable if you have limited contracts as well.
“Purchasing used machinery offers you high flexibility especially when you have short-term projects,” Machinery Network explained. “You could be requiring certain equipment for a particular period after which you will sell it with minimal depreciation.”
Cutting overtime or implementing a hiring freeze are also options, though not the best. If tariffs do go into play, the trade war could kick off and you may even need to consider layoffs as an option to keep your manufacturing business in operation.
How Great Will America Be Under Trump Tariffs?
All tariffs aside, the auto industry in America is on an upswing with production doubling in the last ten years. Not to mention that the auto industry employs almost eight million people in the U.S., which is an employment increase of 50 percent in as little as seven years. Trump could stall growth, and that would be not so great for America.Updated Date: 20 July 2018, 19:26