Publisher's Statement - March 2019
Will tariffs continue to paralyze the industry?
We’re in swamp of tariffs.
Shipping containers are now stacked up, one on top of the other in U.S. ports, as suppliers have hoarded product in anticipation of recent tariffs. I’ve been told they stand so tall that it’s become difficult to access inventory on lower units. After bolstering inventory so much out of concern for the trade wars, folks we have spoken with have said they’re now product rich and cash poor.
Nationwide, many are also hunkering down and putting off growing their businesses with hiring freezes and stalling on capital investments.
What’s to be done? What’s next?
• The USMCA (or NAFTA 2.0) must now get voted on by Congress, though there will be some tough sledding with numerous hearings and discussions. As Aaron Lowe, senior vice president of Regulatory & Government Affairs for the Auto Care Association, says, it’s not a slam dunk. While the administration will have a difficult time getting its passage, it’s still possible. Let’s hope it doesn’t.
We shall see.
• Section 232 Steel-Aluminum Tariffs also has had a profound effect on the auto industry, as most parts contain at least one of those materials. Price increases have been built into invoices for raw materials from manufacturers. Lowe said he isn’t hopeful that this will change anytime soon.
• The Section 232 Auto Imports Investigation is a study that examines national security concerns as it concerns trade and auto parts, which will be released days after this writing. It recommends tariffs of up to 25 percent on auto parts. Lowe believes there are provisions in the USMCA agreement that states auto parts would be exempt, but only up to the point of current imports.
In other words, any vehicles or parts that exceed current import levels would not be exempt from the 25 percent tariff. Lowe said it’s possible that this tariff is merely a bargaining chip to sway Europe and others into more favorable trade terms for the U.S.
We shall see.
• Section 301 China Imports has had three rounds of tariffs, two of which have had resounding impact on the auto industry. As this pen is on the paper, China and the U.S. are in negotiations in hopes that there will be some memorandum of understanding attained before a March 1, deadline, after which a 25 percent tariff will take effect.
Amidst the soggy muck, however, there is new-found footing as the industry has galvanized in clear, united opposition to the Administration’s lurching trade policies as it wades through its weeds and thickets.
“For the first time, the entire auto industry is united to form a coalition against the tariffs,” Lowe said.
Will it be enough?
We shall see.