Donald Trump's tariffs deal a blow to already-shrinking US auto sales

Ford compact cars for sale at a dealership in Chicago, Illinois on June 19, 2017.
Ford compact cars for sale at a dealership in Chicago, Illinois on June 19, 2017.PHOTO: AFP

NEW YORK (BLOOMBERG) - The auto industry is warning that US sales declines, which have become routine over the last year, may continue thanks to the tariffs President Donald Trump plans to slap on steel and aluminium imports.

Trade groups representing automakers including General Motors and Toyota, plus parts suppliers like Robert Bosch, tried to warn the Trump administration of unintended consequences before the President said on Thursday he plans to order tariffs of 25 per cent on imported steel and 10 per cent on aluminium.

US automakers' shares - already slipping because of weak February sales - extended declines 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."

Five of the six biggest car manufacturers on Thursday (March 1) posted lower February deliveries than a year ago. GM shares slumped 4.5 per cent as of 2.30pm in New York, while Ford and Fiat Chrysler both dropped about 3.5 per cent.

While the Trump administration did the auto industry a favour by cutting taxes late last year, 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 South Korea's Hyundai.

 

"Investments earmarked for new products and plants will instead be funnelled to pay for rising steel and aluminium prices used in existing products and facilities," Bozzella said in a statement released on Wednesday.

Global Automakers said that President George W. Bush's 2002 steel tariffs cost the economy 200,000 jobs, including 30,000 in Michigan, Ohio and Pennsylvania.