There are no winners in these trade war tariffs

Interesting times, indeed.

President Trump is considering raising U.S. duties to 25 percent on all imports of automobiles — and auto parts. This is in addition to steel and aluminum tariffs. As a result, U.S. automakers and parts manufacturers will suffer. And so will the supply chain.

“Tariffs can affect companies large and small — affecting prices and impacting jobs,” said Melanie Hellwig White, president of Hellwig Suspension Products, who recently issued a video statement that addresses the duties. “We design and manufacture all of our sway bars and springs at our plant in Visalia, California ... and we still use only American-made steel.

“But when the tariffs were announced, the demand for American-made steel skyrocketed and the supply chain couldn’t meet the demand, so prices skyrocketed, too. The only way to stay in business is to raise prices, and we don’t like doing that because it impacts our customers. This is the direct impact a trade war can have, even if you’ve been doing the right thing by buying American materials.”

And then there are Trump’s proposed U.S. duties on import cars and parts. According to a recent analysis by the Peterson Institute for International Economics (PIIE), a private, nonpartisan nonprofit institution, if those U.S. duties are implemented, production in those industries would fall 1.5 percent and cause 195,000 U.S. workers to lose their jobs within three years.

The report also states that the U.S. auto and parts industries would shed 1.9 percent of their labor force and “there would be additional fallout if other countries retaliate in-kind with tariffs on the same products: production would fall 4 percent, 624,000 U.S. jobs would be lost, and 5 percent of the workforce in the auto and parts industries would be displaced.”

Our U.S. industries depend on imported parts, especially those that don’t have accessible domestic-made substitutes. Tariffs would only raise prices and lower U.S. demand at home and aboard.

As Hellwig’s White pointed out, companies would have to decide how much to raise prices. The alternative is reduced profits by absorbing additional costs. Pick your poison.

As Ann Wilson, senior vice president of government affairs of the Motor & Equipment Manufacturers (MEMA), has said, OEMs and suppliers might have to consider relocating sources and manufacturing, but that brings with it the logistics and costs of broken supply chains.

Lost jobs, displaced workforces, increased prices, disrupted supply chains and lost business? For what and what costs? Interesting times, indeed.

Parts & People

Parts & People is published monthly by Automotive Counseling and Publishing Company, Inc., a Colorado corporation, P.O. Box 18731 Denver, CO 80203, 303-765-4664. President-Lance Buchner. Founded by Lance Buchner and Dave Lucia.