President Trump says that foreign countries, not Americans, will pay his border taxes. But a new analysis by Anderson Economic Group shows how his auto tariffs on Mexico and Canada are starting to bite U.S. auto makers and will soon hit consumers.
Mr. Trump in March slapped 25% tariffs on autos and parts in the name of protecting national security. Oh no, an invasion of Mexican Chevys!
Manufacturers rushed to import parts and stockpile inventory to dodge the tariffs, but they started to face the full tariff impact in July.
Anderson Economic Group reports that tariffs on Canadian and Mexican cars and parts totalled $1.4 billion in July alone, about two and a half times the monthly average through June.
Tariff costs jumped even as imports of some product categories fell. The share of Mexican cars exempt from tariffs fell to 20% in July from about 90% before Mr. Trump’s border taxes took effect.
The biggest victims are U.S. auto makers because they rely heavily on North American supply chains.
Mr. Trump’s recent trade deals with South Korea and Japan cut their border taxes on autos to 15%.
Ford this summer forecasted a $2 billion tariff hit to its bottom line this year, and General Motors expects a $5 billion profit dent.
This means U.S. auto workers will get thousands of dollars less in profit-sharing checks. Meantime, a Federal Reserve business survey last week noted that “automobile dealers experienced an increase in demand for parts and service as consumers chose to keep their vehicles longer,” but “new car sales were flat to down.”
Americans will hold onto their jalopies longer if they can’t afford a new Chevy. That won’t help the U.S. auto industry or workers.
