Stellantis vehicles are unloaded at a car park facility used by the auto maker in Windsor, Ont., in April.Dax Melmer/The Globe and Mail
U.S. automakers and other companies are calling on the Trump administration to halt the “unpredictable” expansion of steel and aluminum goods subject to tariffs, warning that the higher costs and uncertainty jeopardize new investments and jobs.
The U.S government launched a new process Wednesday that will expand the list of auto parts and other goods subject to Section 232 steel and aluminum import taxes by allowing industry stakeholders to submit products for inclusion. A similar move in August added 50-per-cent tariffs to 407 imported products worth US$240-billion.
The trade groups warn in a letter to Jeffrey Kessler, the under secretary for industry and security at the U.S Department of Commerce, that the “sudden expansion” of tariffs is driving up prices for goods that manufacturers are unable to find domestically. The unpredictability of the trade policies hinders companies’ investment and production planning, reads the letter, signed by the American Automotive Policy Council, which represents Ford, General Motors and Stellantis in the U.S., the Aerospace Industries Association and more than 40 other industry groups.
“We urge the department to eliminate further unpredictable expansions … and make targeted determinations with a clear nexus to national security,” the groups said. “The harm to U.S. employment among downstream producers of items now covered will ultimately be significant, including … to those that are key to powering critical industries and the broader U.S. economy.”
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U.S. President Donald Trump used Section 232 of the Trade Expansion Act of 1962 to impose tariffs on foreign cars, metals and other goods, declaring the imports threaten national security.
Automobiles are taxed at 25 per cent. Cars from Canada face tariffs based on their non-U.S. content, while Canadian-made auto parts are exempt except for the share that is not compliant with the continental free trade agreement.
The U.S. Department of Commerce did not immediately respond to e-mailed questions.
There is no indication Canada’s auto parts will lose their tariff-free status in the expansion, said Flavio Volpe, head of the Automotive Parts Manufacturers’ Association, which represents the Canadian companies that make and supply parts.
“I’m currently unconcerned,” Mr. Volpe said. “Obviously we don’t let our guard down.”
But Mr. Volpe echoed worries of the U.S. trade groups about the lack of industry consultation when the Trump administration adds to the list of goods subject to import taxes.
“The context is that they moved so quickly because the President woke up one morning and put a tariff on,” he said by phone. “Normally what you do is you do the work and then you do consultation with the industry to exclude stuff. Instead, now it’s, ‘Oh, we need to move so fast, we’ve got to put everything in.’”
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Tariffs paid by U.S. automakers that import cars and auto parts made in Canada and Mexico surged to US$1.39-billion in July.
Tariffs on Canadian-made cars reached US$311-million, underscoring the financial impact of trade policies on manufacturers and consumers, according to a report from Michigan’s Anderson Economic Group. Mexican-made cars were subject to tariffs of US$801-million in July, comprising the lion’s share of the total.
“US$1.4-billion for one month is a huge bill,” said Patrick Anderson, principal of the consultancy, which analyzed trade figures from the U.S. Census Bureau and U.S. Bureau of Economic Analysis.
Tariffs on Canadian and Mexican cars in June totalled US$1.6-billion, while May’s figure was US$1.78-billion, the U.S. Census Bureau said in an e-mail to The Globe and Mail.
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The totals collected from U.S. importers – Ford, GM, Toyota and other manufacturers – signal U.S. consumers will soon be faced with higher prices, Mr. Anderson said, as car sales drop.
For now, carmakers have responded to the tariffs by attempting to shield buyers from the new costs. They sped up production and imports and stockpiled parts ahead of the taxes. Now that the tariffs are here, they are absorbing much of the price increases, have slowed production and stopped importing some models.
These are short-term tools employed while Mr. Trump’s stated goal – moving production to the U.S. – remains unrealistic, Mr. Anderson said.
“Canada and the United States have integrated their production for so long that rapid changes in policy by governments can’t undo the long-standing production practices, supply chain networks and the simple mechanics of how you assemble a car very quickly,” he said.