Automakers, Already Taking a Hit From Trump’s Mexican Tariff Threat, Worry the Pain Has Only Just Begun

by admin June 2, 2019 at 1:32 pm

Ram Heavy Duty Saltillo Mexico assembly, Image: FCA

The profit-focused appeal of building vehicles in low-cost jurisdictions propelled many automakers to boost manufacturing capacity in America’s southern neighbor — a decision that now haunts them.

After President Donald Trump issued a Thursday statement declaring his administration would levy a 5 percent tariff on all Mexican-made goods starting June 10th, some $17 billion in market value evaporated from top automakers the following day. Ford, General Motors, and Fiat Chrysler all saw their share prices tumble. Should Trump follow through on his promise of an escalating tariff (a threat designed to stem illegal migration into the U.S.), the pain felt by both companies and their customers will be extreme.

Naturally, the industry is pushing back the best it can.

Models built south of the border are too numerous to list, but include regular and crew cab versions of the new-for-2019 Chevrolet Silverado and GMC Sierra, the Volkswagen Jetta and Toyota Tacoma, Chevrolet’s new Blazer, and Ram’s redesigned HD models.

A $1 billion BMW plant scheduled to open next week builds the next-generation 3 Series — a crucial model for Bimmer, and one with no shortage of similarly priced competition.

 

While the above list doesn’t show it, Mazda also produces U.S.-bound vehicles in Mexico. Honda, too.

In a statement, the White House said tariffs on Mexican goods would rise to 10 percent on July 1st if nothing is done to seal the border for illegal migrants, with the levy rising to 25 percent by October.

According to Bloomberg, Juergen Pieper, head of automotive research at Bankhaus Metzler, said BMW plans to slow the increase in output from its Mexican facility in response to the looming tariff. Once up to speed, the San Luis Potosi plant is expected to account for one-fifth of North American BMW production.

Deutsche Bank auto analyst Emmanuel Rosner claims a 25 percent tariff would cost the industry over $86 billion annually.

Mexico’s president, Andres Manuel Lopez Obrador, urged calm on Friday. In a statement to media reported by Reuters, Lopez Obrador said, “I tell all Mexicans to have faith, we will overcome this attitude of the U.S. government, they will make rectifications because the Mexican people don’t deserve to be treated in the way being attempted.”

Trump’s proposed tariffs earned a swift rebuke from the U.S. Chamber of Commerce, with Neil Bradley, the group’s executive vice president and chief policy officer, telling reporters, “We have no choice but to pursue every option available to push back.”

Nor are industry groups happy about the development. Jay Timmons, president of the National Association of Manufacturers, said the tariffs “would have devastating consequences on manufacturers in America and on American consumers.”

David Schwietert, interim head of the Alliance of Automobile Manufacturers, said in a statement, “Any barrier to the flow of commerce across the U.S.-Mexico border will have a cascading effect – harming U.S. consumers, threatening American jobs and investment.”

[Image: Fiat Chrysler Automobiles]

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