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Toyota says Trump's tariffs to 'adversely impact' automakers

The auto industry is warning that US sales declines, which have become routine over the past year, may continue thanks to the tariffs President Donald Trump plans to slap on steel and aluminum imports.

[SOUTHFIELD, Michigan] The auto industry is warning that US sales declines, which have become routine over the past year, may continue thanks to the tariffs President Donald Trump plans to slap on steel and aluminium imports.

Toyota Motor, which plans to build a new US$1.6 billion factory in Alabama with Mazda Motor, said the administration's decision will "adversely impact" auto companies by raising costs and prices of cars and trucks sold in the US More than 90 per cent of the steel Asia's biggest carmaker needs in the US is from the country, it said in a statement.

Trade groups representing automakers including General Motors and Toyota, plus parts suppliers like Robert Bosch, tried to warn the Trump administration of unintended consequences before the president said Thursday he plans to order tariffs of 25 per cent on imported steel and 10 per cent on aluminium. Asian automakers' shares declined while US carmakers - already slipping because of weak February sales - extended their drop after Mr Trump's comments.

"These proposed tariffs on steel and aluminium imports couldn't come at a worse time," said Cody Lusk, president of the American International Automobile Dealers Association. "Auto sales have flattened in recent months, and manufacturers are not prepared to absorb a sharp increase in the cost to build cars and trucks in America."

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Honda Motor, which declined to comment on the administration's move, led the drop in shares of Asian carmakers.

Five of the six biggest car manufacturers on Thursday posted lower February US deliveries than a year ago. GM shares slumped 4 per cent in New York, while Ford Motor dropped 3 per cent and Fiat Chrysler fell 2.8 per cent.

The average car includes about US$830 of steel and US$400 of aluminium, according to a Feb 26 analysis by Colin Langan, an analyst with UBS.

He projected that Ford's raw material costs were already going to rise by US$1 billion this year, and said Thursday that the tariffs would add another US$300 million.

GM's raw material costs, already seen climbing US$800 million, would rise an additional US$200 million from the import measures. Mr Langan characterised rising raw material costs as "manageable". Charlie Chesbrough, senior economist for researcher Cox Automotive, estimates the tariffs Mr Trump proposed would add about US$200 to the total price of a vehicle.

"It's unfortunate because it comes at a time when there are already fears about inflation," he said in an interview. "This is only going to add fuel to that fire."

While the Trump administration did the auto industry a favor by cutting taxes late last year, the tariffs have the potential to "nullify many of the benefits" by boosting vehicle prices, said John Bozzella, president of the Association of Global Automakers. The group represents companies including Japan's Toyota, Germany's Bosch and South Korea's Hyundai Motor.

"Investments earmarked for new products and plants will instead be funneled to pay for rising steel and aluminium prices used in existing products and facilities," Mr Bozzella said in a statement released Wednesday.

Global Automakers said that President George W Bush's 2002 steel tariffs cost the economy 200,000 jobs, including 30,000 in Michigan, Ohio and Pennsylvania.

Even without the new tariffs, rising metal prices have been a problem for Ford. The second-largest US automaker said in January that 2018 would be a "bad year" as costs surge. The price of steel, Ford's biggest commodity purchase, has jumped about 33 per cent since the start of last year. Aluminium, used for the bodies of F-Series pickups, is up more than a quarter.

"Certainly, this is going to be a negative for the vehicle market," Mr Chesbrough said. "At some point, it's going to put vehicles just out of reach for some buyers and it's going to cause some kind of pullback in the market."