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New US Tariffs Could Increase Car Prices

New US Tariffs Could Increase Car Prices

New tariffs proposed by the United States may increase domestic car prices.

The White House proposed new tariffs on all steel and aluminum imports at a meeting with US metal industry officials on Thursday. While the move would surely be seen as popular with those in the steel-making industry, it could very well prove disastrous for domestic car manufacturing.

The proposed tariffs would be 25 percent on steel and 10 percent on aluminum and be for all imports, with the President not discriminating on country of origin. Such a move would be sure to anger America’s allies, such as Canada and Mexico, that currently provide much of the steel and aluminum used in US manufacturing. It would also be a violation of NAFTA, which is still under renegotiation.

However, the move seems to be mostly aimed at China, who have driven the global price of steel downward by expanding their steel industry using government subsidies. The US has argued for years that this trade practice puts US producers at a disadvantage compared to their Chinese rivals.

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via Reuters

While the move would be beneficial for the US metalworks industry, it would prove disastrous for US manufacturing, including the auto industry. Although most of the steel used in American-made cars is produced locally, such a large tariff on steel prices is sure to raise the global price of steel and thus increase the price of domestic cars.

In the short term, it may also cause US manufacturing to further move offshore to avoid the tariff.

Indicated it could retaliate against the American tariffs by targeting American agricultural exports, such as soy, which China argues benefits from American subsidization in much the same way as Chinese steel production.

In the end, it’s the American consumer that would be hurt most by steel tariffs as it would cause a host of highly expensive purchases, such as houses and cars, to become even more expensive.

Time will tell if this is the case on steel tariffs.

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