Trump Plans Massive Tariffs On Metals, Which Would Inevitably Raise The Price Of Cars

President Trump said today he would impose a 25 percent tariff on foreign steel, and a 10 percent tariff on aluminum, in an effort to revive the American metals industry. This is bad! Let’s count the ways this is bad.

It’s bad, first and foremost, because higher steel prices will inevitably raise the cost of cars. Why, you ask? Because American steelmakers will have a huge incentive to raise the price of the steel they make, pretty much just because they can. Currently, most American automakers build their cars here with (mostly) American steel, in addition to some imported steel. This situation won’t change so much as get more expensive for everyone.

It’s also bad for American automakers, specifically, since it’ll give a huge incentive for companies to build their cars outside the U.S. and import them in, a potential boon for foreign carmakers.

American automakers know this, of course, and have long been opposed to any tariffs on raw materials. The American Automotive Policy Council, a trade group representing GM, Ford, and Fiat Chrysler, had his to say in May:

(If) the president were to increase tariffs on foreign steel or impose other import restrictions, the auto industry and the U.S. workers that the industry employs would be adversely affected, and (this) unintended negative impact would exceed the benefit provided to the steel industry from this executive action…

Auto dealers also don’t love it, with the American International Automobile Dealers Association pushing out a statement on Thursday.

“These proposed tariffs on steel and aluminum imports couldn’t come at a worse time,” said AIADA President and CEO Cody Lusk. “Auto sales have flattened in recent months, and manufacturers are not prepared to absorb a sharp increase in the cost to build cars and trucks in America. The burden of these tariffs, as always, will be passed on to the American consumer.

This will also probably lead to a trade war with China, which makes the majority of the world’s steel. Guess who wins in trade wars? Hint: Not you.

From Bloomberg:

A U.S. move on tariffs may provoke retaliation from China, the world’s biggest steel and aluminum producer. China has already launched a probe into U.S. imports of sorghum, and is studying whether to restrict shipments of U.S. soybeans — targets that could hurt Trump’s support in some farming states. While China accounts for just a fraction of U.S. imports of the metals, it’s accused of flooding the global market and dragging down prices.

If Trump’s record on promises is anything to go by, this may not happen at all. Trump announced the tariffs at a White House meeting with metals industry executives on Thursday. But the tariffs haven’t actually happened yet; Trump said they’ll be happening “some time next week.” The stock market, meanwhile, hasn’t waited, and is in the process of informing the president what it thinks:

So, we’ll see! Stay tuned. Another day full of dread.

source: by Erik Shilling

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