Trade

Automakers Say Trump’s Tariffs On Mexico Will Cost Billions

JM Ashby
Written by JM Ashby

If Trump imposes tariffs on Mexico next week as he says he will, it will cost the auto industry among others billions of dollars.

For their part, the Toyota Motor Corp addressed a letter to Toyota dealerships this week that said Trump's tariffs could cost them as much as $1 billion.

In an email seen by Reuters, Toyota Motor Corp told its U.S. dealers the duties could cost its major suppliers between $215 million and $1.07 billion.

The email, dated June 3, from Toyota’s North American sales chief, Bob Carter, also told dealers that 65% of the Tacoma midsize pickup trucks the Japanese automaker plans to sell in the U.S. market in 2019 will be imported from its plant in Baja, Mexico.

On Tuesday Kevin Clark, chief executive at auto supplier Aptiv PLC told investors at a conference in Boston that a 5% tariff would cost it around $17 million per month.

A billion dollars is a lot of money, but General Motors, Ford, and Fiat-Chrysler would be far worse off according to estimates from Deutsche Bank.

American automakers import more parts and vehicles from Mexico than their foreign counterparts do and Trump's tariffs could cost them billions more as a result.

From the Detroit Free Press:

"But U.S. automakers would be worse off than the Japanese and Korean (carmakers), particularly GM and FCA. We believe the high volume/content of full-size pickup trucks manufactured/sources in Mexico and sent to the United States may surprise investors who typically think the only real exposure is passenger cars," Deutsche Bank said.

The update estimated that if the automakers absorbed the full cost of 25% tariffs, the potential annual profit hit would be on $3.3 billion for Ford, $6.3 billion for GM and $4.8 billion for FCA.

Passing the costs on to consumers would raise the price of vehicles roughly $2,400 for GM, $2,200 for FCA and $1,600 for Ford, Deutsche Bank said. Factoring in foreign brands, the average consumer price increase is calculated at $1,300 per vehicle.

These gruesome, pessimistic estimates are based on the assumption that Trump will eventually impose tariffs of 25 percent on goods imported from Mexico.

We don't necessarily know for sure that's going to happen, but it's entirely plausible. It may even be likely.

At this point in his global trade war, Trump has embraced the worst option more often than not. Investors didn't believe Trump would increase his tariffs on Chinese goods from 10 to 25 percent, but here we are.

Toyota and FCA are foreign-owned companies, but they directly employ over 30,000 and 56,000 Americans respectively. Over a hundred thousand more Americans are also employed at dealerships that sell their vehicles.

  • muselet

    Never let it be said Donald Trump lacks confidence in his own wonderfulness:

    “Nobody knows more about trade than me.” (March 2016)

    “I understand money better than anybody.” (June 2016

    “I think I know about [the economy] better than [the Federal Reserve].” (October 2018)

    “I will be the greatest jobs president that God ever created.” (June 2015)

    “Nobody knows jobs like I do!” (January 2016)

    “I will bring our jobs back to the U.S., and keep our companies from leaving. Nobody else can do it. Our economy will ‘sing’ again.” (March 2016)

    In order: no, no, bullshit, not in this reality, certainly not, and oh, give me a break.

    Trump has, however, told the truth at least once in the recent past. In 2017, the Wall Street Journal editorial board asked whose advice on economics he took, to which Trump replied: “Honestly, I feel that I have such a vast feeling for it that I really — you know, Milton Friedman was good — but I don’t really listen to anybody.”

    I wonder how many Trump supporters will be happy to pay a Trump-added extra $1300 or so for their next new vehicle.

    –alopecia

    • Badgerite

      trump is a trust fund baby who went bankrupt running a casino. The only thing he knows how to do is screw other people. Yes, he is a “racist”. His father was a member of the KKK. He wanted the Central Park Five executed so badly he took out a full page ad in the Times, I believe. And didn’t want their convictions overturned even when it was clear from DNA tests and the confession of the lone criminal who assaulted the Central Park jogger that they were innocent of any crime. He was sued for facial discrimination against renting to blacks in his own buildings and the evidence is compelling that such a discriminatory policy was in place in his buildings.
      What did Kushner say? “65 years of no racism”? Uh huh.