Leading automakers fear Trump's "grenade" – imposing US auto rates

NEW YORK (Reuters) – Major automakers are optimistic about the outlook for the US economy and auto sales, but there remains a big question: will President Donald Trump launch a grenade? in the sector by imposing tariffs of up to 25% on cars and motor vehicles imports of parts?

The industry is about to wait, but tariffs would be a bad idea, Carter Carter's Bob Carter, head of US sales at Toyota Motor Corp, told Carter Wednesday.

"Frankly, if the tariff is applied to the auto industry, it is that the grenade is withdrawn," he said at a conference held Tuesday on the occasion of the International Auto Show of New York. "I do not think the US economy can run out pretty fast if it happens."

In an interview, Carter said that he was optimistic that the Trump government decided not to apply tariffs, but "uncomfortable" given the decision made by the president last year. impose tariffs on imports of steel and aluminum.

Trump is running for election in 2016 on a protectionist platform aimed at bolstering jobs in the manufacturing sector in the United States. He has stated in the past that he is considering imposing tariffs of up to 25% on motor vehicles and their parts.

In February, the US Department of Commerce made recommendations to Trump, which, according to auto industry officials, would include at least some tariffs on fully assembled vehicles or on critical technologies and components related to electric, automated vehicles. connected and shared.

These rates would have a deeper impact on car and consumer prices than the previous metal tariffs that had been imposed. The steel and aluminum tariffs cost the carmakers of Detroit, General Motors Co and Ford Motor Co. $ 1 billion each, and Fiat Chrysler Automobiles NV announced that the costs could be as high as $ 350 million. dollars in 2019.

HEAVY LOBBYING

Trump is expected to make a decision by mid-May, but some officials believe that the administration will find a way to delay the final action, using the threat as leverage to try to win concessions on vehicles in trade negotiations with Japan and the European Union.

Joe Eberhardt, managing director of Jaguar Land Rover North America, said a 25% tariff on all imported vehicles would cost the company "billions". If tariffs were applied to parts, US automakers would also be hit hard, he said.

"We just hope that reason will prevail," he said.

Toyota and other automakers are pushing hard to block new tariffs on imported vehicles, saying the industry's global supply chain is so tightly intertwined that tariffs would raise prices, hurt sales and, therefore, harm to the economy.

IMPACT ON PRICES

Joel Prakken, chief US economist at IHS Markit, said at a conference this week in front of the New York auto show that new car sales in the United States would amount to $ 16.8 million. units, a decrease of 500,000 units from 2018 but historically high.

However, tariffs could reduce the sales of an additional 2 million vehicles by half to two-thirds of the percentage point of the US gross domestic product, he said.

"It would be horrible for the auto industry, for consumers and for the US economy," said Fred Diaz, general manager of Mitsubishi Motors Corp.

In one example, Carter said that 72% of the Camry sedan parts manufactured by Toyota in Kentucky came from US suppliers, but 28% were imported. A tariff of 25% would increase the price of this car by $ 1,800 in one day.

"There is no 100% American vehicle," he told Reuters.

According to industry estimates, larger tariffs could add an average of $ 4,000 to the price of a new sticker.

Nissan Motor Co Ltd's North American president, Jose Valls, said the automaker "has invested heavily in the US and that it (the Trump administration) must take into account our customers and our employees" .

"We will adapt," said Valls. "But we do not make decisions about things that have not been finalized yet."

Mr. Diaz, from Mitsubishi, said that industry groups were doing a lot of lobbying against tariffs.

"The reaction is that we are heard," he said. "But basically, how do you really know?"