Toyota says Trump’s tariffs to ‘adversely impact’ automakers

Bloomberg

The auto industry is warning that US sales declines, which have become routine over the past year, may continue thanks to the tariffs President Donald Trump plans to slap on steel and aluminum imports.
Toyota Motor Corp., which plans to build a new $1.6 billion factory in Alabama with Mazda Motor Corp., said the administration’s decision will “adversely impact” auto companies by raising costs and prices of cars and trucks sold in the US. That’s even as more than 90 percent of the steel Asia’s biggest carmaker needs in the US is from the country.
Trade groups representing automakers including General Motors Co. and Toyota, plus parts suppliers like Robert Bosch GmbH, tried to warn the Trump administration of unintended consequences before the president said he plans to order tariffs of 25 percent on imported steel and 10 percent on aluminum. Asian automakers’ shares declined while US carmakers—already slipping because of weak February sales—extended their drop after Trump’s comments.
“These proposed tariffs on steel and aluminum imports couldn’t come at a worse time,” said Cody Lusk, president of the American International Automobile Dealers Association. “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.”
Honda Motor Co., which declined to comment on the administration’s move, led the drop in shares of Asian carmakers. Following is a table showing how much the shares declined.
Five of the six biggest car manufacturers posted lower February US deliveries than a year ago. GM shares slumped 4 percent in New York, while Ford Motor Co. dropped 3 percent and Fiat Chrysler fell 2.8 percent.
The average car includes about $830 of steel and $400 of aluminum, according an analysis by Colin Langan, an analyst with UBS.
He projected that Ford’s raw material costs were already going to rise by $1 billion this year, and said that the tariffs would add another $300 million. GM’s raw material costs, already seen climbing $800 million, would rise an additional $200 million from the import measures.
Langan characterised rising raw material costs as “manageable.”
Charlie Chesbrough, senior economist for researcher Cox Automotive, estimates the tariffs Trump proposed would add about $200 to the total price of a vehicle.
“It’s unfortunate because it comes at a time when there are already fears about inflation,” he said. “This is only going to add fuel to that fire.”
Toyota said it buys sheet steel from United Steel Steel Corp., ArcelorMittal and AK Steel Holding Corp., and sheet aluminum from Arconic Inc., Novelis Corp. and a venture of Constellium NV and UACJ Corp.
Carmakers and suppliers getting most of their aluminum and steel from US producers may not shield them from rising costs, said Kristin Dziczek, director of the industry, labor and economics group at the Center for Automotive Research in Ann Arbor, Michigan. That’s because those producers also use imported material, which they process into other steel or aluminum products, she said.
While the Trump administration did the auto industry a favor by cutting taxes late 2017, the tariffs have the potential to “nullify many of the benefits” by boosting vehicle prices, said John Bozzella, president of the Association of Global Automakers. The group represents companies including Japan’s Toyota, Germany’s Bosch and Hyundai Motor Co.