Trouble With Tariffs

With the announcement of a 25% tariffs on foreign steel imports, the auto manufacturing industry is looking toward the future with some trepidation.  Foreign steel prices, called ‘a threat to national security’ by the current administration in a global economy which has been flooded with Chinese steel, is expected to be hit by the tariffs. At first glance, the move sounds like it will bolster U.S. companies. Instead, say experts, the tariffs will merely climb onto the back of the U.S. auto buyer, who it is estimated will pay $2000 more for a new car to cover the cost of the tariffs.

Automakers

American automakers are frustrated. Most support free trade and many are concerned that prices will make consumers shy away and lead to massive layoffs. Since automakers are one of the biggest manufacturers in the nation, there is a good reason to be concerned. An investigation into the impact of the new policies is currently being conducted and is expected to be finished by August, giving the administration plenty of time to create a policy and political soundbite to prove they’ve got the best interest of their voting base at heart, while at the same time ignoring the long-term economics of the policy. 

Ashley Craig, Partner, and Co-Chair, International Trade Group at Venable LLP, says that the best hope for automakers to reverse Trump’s decision on the tariffs is to get Fox News to speak out against it. While he doesn’t usually respond to criticism, public outcry, particularly when it comes from his fan base, does seem to make him react. It will be the jobless auto workers, angry that they’ve been laid off, which will have the desired effect.

A new reality

But, the reality is that the demand for steel that was once part of the American landscape no longer exists. Ned Hill, an economics professor at Ohio State University, says that demand for steel could have come with an infrastructure bill, whereby the federal government could have created a demand for steel with the creation of new roads, bridges and mass transit. Sadly, that isn’t in the plan.

Backlash

Foreign backlash has been swift and harsh. China has already announced they will tariff U.S. goods in return, and American soybean farmers will have to try to sell their crops to the already-agitated Chinese. Even the European Union has announced retaliation to the tune of an estimated 13-14 billion dollars, prompting fears of a coming transatlantic trade war.

What does it mean for the consumer?

Mark Corby, owner of Mark’s Bolts in Glendale, says that if the tariffs affect their merchandise, they will, “simply add a ‘Tariff’ tax to the import products only, as the domestic products we carry aren’t subject to the tariff.” While we don’t expect everyone to be as fair and reasonable as Mr. Corby, we see it as a sign of the times that businesses are bracing for the impact and gearing up to raise prices, and it may not be limited to cars.

We will keep our readers posted.

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