Washington – Donald Trump's administration introduced fresh duties of 25% on abroad cars and car parts on Thursday (27 March). The decision is to bring more than $100 billion in extra gross per year, but caused a violent reaction of the markets and criticism of experts.
New fares – who will endure the most?
New duties will be imposed from next Wednesday and will cover all countries, including US allies specified as Japan, Germany and South Korea. They concern not only finished vehicles, but besides parts specified as engines, gearboxes and electrical components. but for goods imported under contract USMCA (USA-Mexico-Canada), subject to proof of the origin of parts from North America.
– “Our automotive manufacture will flourish as never before” – announced Trump erstwhile signing the decree. However, the reaction of investors was immediate:
- General Motors lost 6% on the stock exchange,
- Ford – 5%,
- Stellantis (owner, among others, of Chrysler) – 4%.
Controversy: Will customs truly aid America?
Experts indicate that Trump's decision can increase car prices for consumers and disrupt the supply chains. By Peterson Institute for global Economics (PIIE), erstwhile duties on steel and aluminum cost Americans 650 000 jobs.
– “It is protectionism that will hit the mediate class. Consumers will pay more and abroad companies can simply transfer costs” – comments Mary beautiful with a PIIE.
On the another hand, the White home argues that Germany and Japan “swindled” USA, moving the production of high-margin components (e.g. engines) to each other. – “They choose the best pieces of cake, leaving us left behind” said an anonymous official.
Will Trump usage customs in negotiations?
The president suggested that duties may be pressure tool, for example, in talks with China about TikTok. – “Maybe we can cut our tariffs a small bit to ease the deal” – he said.
However, economists inform that customs wars frequently end Increase in inflation and economical slowdown. By Bloomberg, akin steps in 2018 led to $40 billion failure to American companies.
Japan reaction
Prime Minister Shigeru Ishiba referred 2 days in a row to the decision of the American administration. On Thursday, March 27, he said that “we must consider what is best for Japan’s national interest. We are considering all options, considering the most effective response." He previously said that “Japan is the country that makes the biggest investments in the United States, so we wonder if it makes sense (Washington) to apply uniform duties to all countries. This is simply a question we have raised and we will proceed to decision forward."
Car exports to the US accounted for over 28% of all nipponese exports to the US in the past year.
On Friday, 28 March, Prime Minister Ishiba committed in parliament to take thorough action to defend local jobs from the trade barriers introduced by the Trump administration, which the Prime Minister believes will have a "very large" impact on the country's economy. The nipponese Government sees the request to launch initiatives to aid nipponese companies finance their activities.
The impact on the nipponese automotive manufacture combined with an always little certain safety warrant may lead to a change in Japan's US policy. On a much more assertive and decision-oriented Tokyo.
Who will benefit from this?
Although Trump promises “Back of factories to the USA”reality can be more complicated. In the short term, duties will strengthen budgetary implications, but in the long word they can weaken the competitiveness of American brands and retaliate the trading partners.
Will fresh customs prove to be an effective weapon or another costly experiment? The answer will come in the coming months.
Source:
- Nikkei Asia – “Trump anounces additional 25% tariff on foreign-made cars”
- Peterson Institute for global Economics – Analysis of Trump’s Trade Policies
- Bloomberg – “Auto Stocks Plunge After Trump Tariff Announcement”
- The Wall Street diary – “USMCA Loopholes and car Tariffs”
Leszek B. Glass
Email: [email protected]
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