The United States imposed 25 percent tariffs on imported car parts on Saturday that could drastically increase the prices of new and used vehicles, as well as for repairs and insurance.
The last tariffs, which President Trump ordered in March as part of his plan to promote national manufacturing, occur after 25 percent levies in imported cars that have a TOK effect in early April.
This second round of tariffs on imported parts will have a broader impact because even cars manufactured in the United States often have engines, transmissions, batteries or other components produced in other countries.
The administration said Tuesday that tariffs intended to “protect national security encouraging national car production and reducing US dependence on foreign cars imports and their pieces.”
Tariffs on the pieces will not apply to the components of Canada or Mexico provided that these goods meet the requirements of a commercial agreement in North America that negotiated the duration of Trump’s first mandate. Among other things, that agreement requests that a minimum percentage of the content of the car parts comes from within North America.
The administration also said that imported cars would not be subject to other levies, such as those in aluminum and steel. And the companies that made cars in the United States would be exempt for two years for having to pay a part of the tariffs for imported parts.
Trump tariffs have already raised new cars prices, since the customer mass went to dealers to buy vehicles before the encumbrances teach effect. Tariffs have a domino effect on the used car market as more people look for affordable alternatives to new cars, increasing demand and prices.
Tariffs on new car parts are also expected to increase the cost of repairs and insurance premiums, because replacement parts will become more expectations. The increase in automobile prices will contribute to general inflation, which Trump had promised to demolish.
The president has insisted that tariffs will bring the manufacture back to the United States. But even if that policy is successful, consumers will still pay more for cars. Many products, including lots or auto parts, can often be much cheaper in China, Mexico or other countries outside the United States.
“Many pieces, such as fasteners, washing machines, carpets, wiring looms are simply not available, we can only buy those pieces here,” said Jim Farley, executive director of Ford Motor, to CNN this week.
Automobile and supplier manufacturers say it will take years to relocate assembly lines. And it is unlikely that billions of dollars commit national manufacturing because or uncertainty about the direction of commercial policy.
Trump has frequently changed about tariff size and how they should be applied. On Tuesday, they modified some of the rules to allow car manufacturers to avoid paying tariffs in a part of the components that matter for two years. The measures provide the industry to relieve, but automobile prices will still increase in thousands of dollars, analysts said.
There will be unpredictable side effects. Financial stress could get some business suppliers, creating pieces of parts.
“Automobile suppliers are already in thin margins,” said Lenny Larocca, leader of the US automotive industry at the KPMG consulting firm. “They cannot pay the total cost of 25 percent of the rates.”
However, Trump’s decision to exempt many parts of Canada and Mexico will relieve the burden of some companies.
The automotive industry represents approximately 5 percent of Mexico’s gross domestic product and used around one million people in the country. Vehicles and pieces are, with much, Mexico’s largest exports to the United States.
“Little by little, this fog is clarifying,” said Marcelo Ebrard, Mexico Economy Minister, in an event with business and diplomatic leaders. “What we are going to face is a situation that is not as disadvantageous as perhaps many expected it to be.”
In Canada, however, many parts manufacturers supply car factories in that country, said Flavio Volpe, president of the association of automotive parts manufacturers. And vehicles that make these plants will still be affected with tariffs when exported to the United States.
“The health of the Canadian auto parts sector is that there is a manufacturing group that we can supply locally,” Volpe said.
On Friday, General Motors said that due to the rate he was eliminating a third shift in a truck assembly line in Oshawa, Ontario. That plant will now build more trucks for Canadians, said the company. Unifor said the reduction would eliminate around 700 jobs from the Union and that it would probably cause parts manufacturers to dismiss another 1,200 people.
Prime Minister Mark Carney said that GM’s decision was a “terrible demonstration” of the economic crisis that Mr. Trump’s tariffs had created for Canada.
Tariffs will hit some faster carmos manufacturers than others. Tesla and Ford are somewhat less vulnerable. Tesla manufactures all cars that sells in the United States in California and Texas. Ford says that it manufactures almost 80 percent of the vehicles that it sells in the United States nationwide, including the F series pills, which are the best -selling vehicles in the country.
General Motors will suffer more, analysts say, because imported pieces often represent more than half of the value of Chevrolets or Cadillacs made in the United States. GM also imports cars from Canada, Mexico and South Korea.
Volvo Cars, who has a factory in South Carolina but uses many parts of China, will also be difficult, analysts say.
Only companies that make vehicles in the United States will feel the pain. Rivian builds electric trucks in Illinois, but imports batteries from South Korea and China that will be subject to tariffs.
Tariffs are expected to reduce less expensive vehicles. Almost 80 percent of cars with a price of less than $ 30,000 will be subject to tariffs of 25 percent, including popular vehicles such as Honda Civic, Toyota Corolla and Chevrolet Trax, according to Cox Automotive.
Car prices probably do not shoot immediately, because most car manufacturers and their distributors have large automobile inventories manufactured before tariffs affect. Ford, Hyundai and Volkswagen are among car manufacturers who have said that prices will not increase for several months. But car manufacturers are not profitable enough to absorb the highest cost of tariffs indefinitely.
Continuous administration officials to discuss tariffs with car manufacturers and tasks could change. But uncertainty is to create huge headaches for car manufacturers. GM said Thursday that rates would cost up to $ 5 billion this year. Other companies such as Stellantis and Mercedes-Benz have told investors that they can no longer make reliable predictions on sales and profits by 2025.
Ian Austen and Mega Emiliano Rodríguez Contributed reports.
