US automakers lobby to exclude low-cost parts from tariffs

SOUTHFIELD, Michigan – US automakers are making a last-ditch effort to sway the Trump administration on tariffs set to take effect this week, contending that levies on the thousands of parts they source abroad could have catastrophic effects on the industry.

Ford Motor, General Motors and Chrysler parent Stellantis are lobbying the administration to exclude certain low-cost car components from the planned tariffs, according to people familiar with the matter.

Executives had meetings with the White House, the Commerce Department and the Office of the US Trade Representative to discuss the exclusion, the sources said.

President Donald Trump’s levies, aimed at bolstering the American auto industry, stand to have ripple effects for the US carmakers that have increasingly turned to low-cost countries for the many parts that make up a modern vehicle.

The administration plans to tax auto components on top of the

planned 25 per cent tariffs on fully built vehicles

, which are set to start on April 3.

Detroit’s automakers have conceded that they are willing to pay tariffs on completed cars and large components such as engines and transmissions, the people familiar with the matter said.

But representatives for the companies have told the administration that levies on parts would drive up costs by billions of dollars, leading to layoffs and profit warnings that would run counter to Mr Trump’s goal of building up the industry, one of the sources said.

Representatives of the companies declined to comment. Mr Trump on March 31 declined to say whether the administration is considering exempting some car parts from the tariffs. He said he had already given automakers “a break” by pushing off tariffs for a month. 

The companies are seeking exemptions on low-value parts such as sheaths of electrical wiring that course through modern cars, which are labour intensive to produce and tend to be made in Mexico and other low-wage countries.

They contend that combined levies would send car prices soaring and depress demand from US consumers, who are already confronting average prices approaching US$50,000 (S$67,000).

In the past few weeks, many automakers stockpiled cars in the US to avoid the tariff impact, and car buyers flocked to dealerships to make purchases before the levies take effect.

Speaking about the tariffs at the weekend, Mr Trump told NBC News that he “couldn’t care less if they raise prices because people are going to start buying American cars”. BLOOMBERG