Will new tariffs spike car prices?

aluminum

The Commerce Department has recommended that Donald Trump put tariffs or quotes on imported aluminum and steel, after concluding that importing too much of these metals poses a national security threat.

In this case, the issue is not that the country is subsidizing prices of steel and aluminum sent to the United States, to drive locals out of business; rather, the Commerce Department is concerned that the US will no longer be able to make key alloys for itself, leading to problems in case of war. The action is not directed solely at China, but at all offshore producers.

aluminum

The United States has already given up domestic manufacturing of many key commodities, including many forms of electronics. The use of Chinese telecommunications software has raised red flags as intelligence agencies are claiming that certain Chinese companies may be tapping into certain calls, using hidden channels.

The three options proposed by Commerce Secretary Wilbur Ross are:

  • Adding 24% tariffs to steel and 7.7% to aluminum imports.
  • Or adding 53% tariffs on steel imported from twelve countries (including China, Russia, and Brazil), and up to 23.6% on aluminum from five countries; as well as limiting imports from other countries to current levels.
  • Simply freezing every country’s maximum imports to 63% of the steel and 86.7% of the aluminum exported to the US last year.

steel

The tariffs and quotas would keep a certain amount of American production capacity alive, but would likely drive prices up sharply. This could revive the sedan trade and help sales of smaller crossovers, as bigger and heavier vehicles — even those, like the Ford F-150, that were lightened through use of aluminum — gained sharply in cost. The move would hurt domestic automakers, which tend to rely heavily on pickups and other larger, heavier vehicles, while helping foreign automakers, especially those that export to the US rather than making cars domestically. Tariffs and quotes might help to make composites and stronger plastics more popular, eventually.

That would be countered by higher profits and more jobs in the steel and aluminum industries, though it’s likely that the overall effect would be negative. Some are concerned it could spark a trade war, which would have a good and bad side — the downside being much higher prices for some goods and possibly fewer exports; the brighter side being more domestic jobs.

It’s also quite possible nothing will happen. The Commerce Secretary might ask the President to take action — but he can’t order action on his own. President Trump has talked a lot about domestic production and trade, but he hasn’t actually done anything about it yet — other than signing Congress’ tax cuts for domestic and foreign companies alike.

About David Zatz 145 Articles
The founder of famed Mopar site allpar.com (and its publisher for 20 years), David Zatz has been writing about cars and trucks since the early 1990s; he also writes on organizational development and business at toolpack.info and covers Mac statistics software at macstats.org David has been quoted by the New York Times, the Daily Telegraph, the Detroit News, and USA Today. You can reach him by using our contact form (preferred) or by calling (313) 766-2304

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