The United States would be taking an unprecedented step in its trade policy. On 2 April, the government will bring in a lot higher tariffs on cars. The tariffs add an additional 25% tax, a cutoff point. They will hit a wide variety of their global suppliers, including Canada, Mexico, South Korea, Japan and Germany. This announcement follows the US’s imposition, in part, of a blanket 25% tariff on Canadian products. On top of that, they have been busy with duties on aluminum and steel imports. Last year, the US imported approximately eight million cars and was involved in approximately $240 billion worth of the trade. Taken together, these new measures could have a profound effect on international commerce.
The United States has long been an unrivaled leader in the global automotive market. Last year, it brought in roughly half of the vehicles sold in the nation. That’s largely due to Mexico now being the top supplier of cars to the US. With South Korea, Japan, Canada and Germany close behind, the new tariffs will break up these long-standing trade partnerships. Businesses importing vehicles will be hit with new fees from 3 April, raising costs on businesses and affecting prices paid by consumers.
This recent action by Canada follows the US’s imposition of illegal tariffs in 2017 and subsequent appeals. It has enacted some C$60 billion ($42 billion, £32 billion) of retaliatory tariffs on American products. The new automobile tariffs that start in April are an order of magnitude worse and more drastic, as they intend to dramatically raise tariffs on imports. With taxes on components slated to start in May or later, those complications will only add additional layers of complexities to the automotive supply chain.
This imposition of these tariffs is placed upon us in a time of increased economic uncertainty. Mark Carney’s observation about the mood underscores the pivot from the climate crisis to the global geopolitical crisis unfolding before our eyes.
“A person who worships at the altar of Donald Trump will kneel before him, not stand up to him.” – Mark Carney
The automotive industry especially relies on international trade and complicated supply chains. It needs to tread through these transformations with intention and care. Industry analysts last week warned that the tariffs would significantly increase production costs. This transition period may result in reduced sales, as manufacturers and consumers get used to new pricing schemes.