US President Donald Trump’s executive order calling for 25% tariffs on steel and aluminium imports has his domestic auto industry scrambling to reassess operations, Kallanish reports.
At an auto conference on Tuesday, Ford Motor chief executive Jim Farley explained that the introduction of the tariffs is causing the automaker cost-prohibitive operational disruptions.
“There may even be a speculative part of the market where prices come up because the tariffs are even rumoured,” Farley said. “So we’ll have to deal with it. That’s what I’m talking about with cost and chaos. It’s a little here, a little there, a couple weeks or a couple of months of vehicles crossing the border, components crossing the border, that’s going to be a tariff. This is what we’re dealing with right now.”
Sherry House, Ford’s chief financial officer, addressed the challenges facing business planning.
Ford executives are working “to protect our flow and to protect our customers. But generally speaking, we’re not making a lot of large decisions at this point. We’re waiting to see the impact of what’s going to happen. Right now, we’re paused on a lot of the Mexico and Canada tariffs,” House said.
At the same conference, General Motors ceo Mary Barra said the automaker is in the midst of preparing for various risks.
“We started doing scenario planning and looking at what are the different things we can change, we can move. We are prepared when we know exactly what’s going to happen. We know the steps we can take and we think we can mitigate 30% to 50% of tariffs without deploying capital. If tariffs are longer, there’s additional things that we’ve studied that we know we can do from a capital-efficient way,” Barra said.
A former US auto executive tells Kallanish that the race against China for global electric vehicle (EV) market share is now endangered by the challenges the 25% tariff poses to the industry as well as changes the Trump administration may pursue with the Inflation Reduction Act (IRA).
“This couldn’t come at a worse time. China is a threat to all manufacturers. Their global dominance in the EV market is enormous, and it will take years for ‘The Big Three’ to catch up. Taking Trump’s intentions to eliminate the IRA EV incentives into account, China will gain further advantages and jeopardise the transition plans for Ford and GM. The confusion caused by any tariff war will magnify the challenge and disrupt all short-term and long-term plans,” states the former auto executive.
According to that same source, all automobile prices will likely rise in the US.
“Tariffs of 25% on steel and aluminium would be costly since a typical vehicle contains about 1,000 lbs of steel and aluminium. It’s difficult to estimate the effects on consumer prices. By some estimates, it could be as much as $1,500. At some point, manufacturers would have to increase prices. When and if tariffs are eased, prices will probably not come down, or if they do, it will be in the form of short-term incentives and gradual price adjustments. Remember, prices tend to rise much faster than they decline,” says the executive.
The Michigan-based automotive advocacy group MichAuto issued a statement regarding the tariffs lodged against Canada and Mexico, suggesting that maybe it would be better to adjust the framework of the existing Uniited States-Mexico-Canada Agreement (USMCA).
“While the administration works to stem the flow of illicit drugs and illegal immigration, this should exclude the use of punitive tariffs, which are counterproductive to commerce. MichAuto urges that the proven tools at hand such as the reopening of the USMCA and the direct input and involvement of our vital industry be utilised in a manner that does not stymie commerce and negatively impact companies and the consumer, but rather works toward solutions that preserve our strong trade partnerships and protect American jobs,” states Glenn Stevens, executive director of MichAuto.
Kristen DiLandro USA
