The business of manufacturing cars in North America for North Americans is going to be an expensive affair, post Trump’s steel tariff hike.
Negotiators working to rework the NAFTA trade deal were caught off-guard by U.S. President Donald Trump’s proposal of imposing a 10% tariff on steel which could not only complicate the business of manufacturing cars in North America but could also ignite trade wars.
Trump’s announcement that he would impose the tariffs beginning next week, raises the risk of exacerbating tensions at the already tough negotiations.
Officials were unable to clarify whether the tariffs would include imports from Mexico and Canada.
As per analysts, the lack of clarity has created a level of uncertainty since some countries could be exempt or taxed at a lower rate.
Further, automakers and the U.S. steel industry are worried that the move could invite retaliatory tariffs which might impact their finished goods.
As per Moises Kalach, head of the international negotiating arm of Mexico’s CCE business lobby, Trump’s flagging a 25% tariff on imported steel is in line with his domestic agenda of boosting U.S. content in industrial goods and is likely to draw unintended consequences.
“Who is the priority here? Workers? Consumers? Somebody will end up paying for this,” said Kalach on the sidelines of the latest NAFTA talks in Mexico City.“What’s going to happen to the competitiveness of North America?”
According to experts, Canada, being the largest exporter of steel to the United States, is likely to be impacted by the tariff, which would also hike up the cost of building vehicles.
“This would be very bad news for the auto industry,” said a source close to the negotiations.
According to Steve Verheul, Canada’s chief negotiator, his team was“keeping an eye on what’s going on outside” but on the whole “It’s a bit of a distraction”.
As per the auto industry, for the vehicles produced in North America, automakers including General Motors Co, Fiat Chrysler and Ford Motor Co source the vast majority of their steel requirement from North America.
General Motors said in a statement, 90% of the steel in its U.S.-built vehicles came from U.S. suppliers.