{"id":4864,"date":"2024-12-08T22:47:30","date_gmt":"2024-12-09T06:47:30","guid":{"rendered":"https:\/\/abovecloud.xyz\/?p=4864"},"modified":"2024-12-08T22:47:50","modified_gmt":"2024-12-09T06:47:50","slug":"trumps-promise-to-tax-imported-goods-could-spell-trouble-for-us-auto-industry","status":"publish","type":"post","link":"https:\/\/abovecloud.xyz\/?p=4864","title":{"rendered":"Trump\u2019s promise to tax imported goods could spell trouble for US auto industry"},"content":{"rendered":"\n

Few vehicles are as emblematic of the American auto industry\u2019s might as the Ford F-150 pickup truck, the nation\u2019s best-selling vehicle for over 40 years. But the F-150 is much less American than its image suggests. A fact that could present unique challenges for the company as\u00a0Donald Trump<\/a>\u00a0moves to \u201cmake America great again\u201d.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Only about 32% of its components are made in the US or Canada, federal data shows, and that could spell trouble if Trump\u2019s proposed tariffs on imported goods are implemented. Even less of the F-150 Lightning electric truck is made in the US \u2013 about 24%, a Cars.com analysis of federal data showed.<\/p>\n\n\n\n

The F-150\u2019s price would almost certainly soar without some mitigation, industry observers say. Moreover, it would be virtually impossible to completely onshore its supply chain in short order \u2013 a process that could take many years.

The uncertainty around the truck is representative of the auto industry as a whole as it waits to see if Trump follows through on his promised blanket taxes on imported goods. Top-selling vehicles in the US are similarly sourced from around the globe, and the auto industry\u2019s supply chain is \u201ca complicated universe\u201d, said Ivan Drury, director of insights with industry analyst Edmunds.

\u201cThe auto manufacturer is more like a parts collector \u2013 it\u2019s not like Ford<\/a> makes every component like everyone thinks,\u201d Drury added. Because of that, tariffs would likely deliver supply chain shocks similar to the pandemic disruptions: \u201cIt could have the effect of you not getting the truck that you want.\u201d<\/p>\n\n\n\n

Trump has proposed tariffs of between 60% and 100% on Chinese goods<\/a>, and a tax of between 10% and 20% on every product imported from all other US trading partners, though very few details are available. During an October rally, he promised<\/a> as much as a 500% tax on cars made in Mexico.<\/p>\n\n\n\n

\u201cI\u2019ll put a number where they can\u2019t sell one car,\u201d Trump boasted to the crowd.<\/p>\n\n\n\n

The goal is to force Ford and other automakers to onshore production and create manufacturing jobs here, but the idea is generating fears of shortages and inflation across the economy \u2013 the tariffs would cost the average US household about $2,600 per year, by\u00a0some estimates<\/a>.

A more expensive F-150 could factor into that figure, but the impact of new tariffs will be felt widely across the industry.<\/p>\n\n\n\n

The industry analyst\u2019s American Made Index<\/a> (AMI) ranks how \u201cAmerican\u201d 100 of the top vehicles sold in the US are, based on where parts are made as reported under the American Automobile Labeling Act, the location of vehicle assembly, US factory employment relative to vehicle production, and engine and transmission sourcing.<\/p>\n\n\n\n

The F-150 and F-150 Lightning ranked 58th and 56th, respectively, in 2024.<\/p>\n\n\n\n

The law does not require automakers to make granular data about where components such as steering wheels or airbags are made, so it is impossible to calculate how much a theoretical 20% import tax would increase the F-150\u2019s cost. But Cars.com reported that the F-150\u2019s 3.5-liter engines \u2013 including the Powerboost hybrid and the Raptor \u2013 are made in Mexico.<\/p>\n\n\n\n

All of its transmissions are made in the US, and final assembly takes place at plants near Kansas City or Detroit. For the F-150 Lightning, all motors and drive units are made in the US, and final assembly is near Detroit.<\/p>\n\n\n\n

\u201cWe\u2019re at a point now in automotive history where the supply chain is not as simple as it once was and the badge on the hood is not indicative of where a vehicle was made,\u201d said Patrick Masterson, chief copy editor at Cars.com.<\/p>\n\n\n\n

Ford didn\u2019t respond to requests for comment, but when previously asked about the AMI rankings, it said: \u201cEvery single Ford F-Series truck is made in America. We build F-150s at Dearborn Truck Plant in Dearborn, Michigan, and Kansas City Assembly Plant in Kansas City, Missouri.\u201d

By comparison, the highest ranking truck in the AMI was the Honda Ridgeline, slotted at sixth, with 70% of its parts produced in the US or Canada, and final assembly in Alabama.<\/p>\n\n\n\n

No vehicles from Detroit automakers are represented in the top 20 \u2013 the highest ranking is the Chevrolet Colorado at 23. Meanwhile, three Teslas are in the top 10 with about 70% of their parts produced in the US, and final assembly in Austin or Fremont, California. The Cybertruck is also among<\/a> the most American-made trucks. Given that figure, tariffs could be a boon to Trump ally Elon Musk.<\/p>\n\n\n\n

An automaker\u2019s calculus on where it sources parts includes variables like cost and efficiency of the components\u2019 production, and many even have joint production agreements with other automakers.<\/p>\n\n\n\n

Fully onshoring would be a long, difficult process because factories would have to be built or expanded, and a workforce would have to be hired and trained. Parts suppliers are often at capacity or do not keep stock on hand to meet sudden shifts in demand, Drury noted.<\/p>\n\n\n\n

If Ford suddenly asked a US supplier for millions of a hypothetical part for the F-150, there would be a \u201csnowballing effect\u201d as the automaker waited for it to be produced, he added.<\/p>\n\n\n\n

\u201cWe don\u2019t have interchangeable cogs, and these aren\u2019t widgets for which you can swap out one for the next \u2013 these are highly specialized components,\u201d Drury said. \u201cThings always sound good on paper at first but the reality of the situation is no factories can be made overnight; a lot of suppliers are stretched thin.\u201d<\/p>\n\n\n\n

Some automakers who have invested in US factories may be in a better position to weather tariffs, Masterson said, especially with EVs. Ford and GM are readying several new plants that will produce EVs or batteries across the south and in Michigan.<\/p>\n\n\n\n

On the other hand, tariffs could be especially problematic for EVs because automakers import critical minerals or electronics, like semiconductors. The semiconductor industry began onshoring under Biden, who implemented significant tariffs on Chinese semiconductors, but it remains far from being able to fully supply US automakers.<\/p>\n\n\n\n

The hit on an F-150 buyer would in part depend on what form tariffs take, Masterson said. Trump has proposed blanket tariffs on imported goods, which would, in theory, include all components produced elsewhere, but observers suspect that may change as he receives input from automakers.<\/p>\n\n\n\n

Trump\u2019s most dramatic claim \u2013 the 500% tax on imported cars \u2013 seemed aimed at those undergoing final assembly in Mexico, though a hypothetical vehicle assembled there could have a significant number of parts sourced from the US.<\/p>\n\n\n\n

While tariffs could ignite turmoil, the cost increases could also benefit automakers by presenting an opportunity to raise prices, and create a\u00a0sellers\u2019 inflation<\/a>\u00a0similar to that which padded major corporations\u2019 profits, including some automakers, as inflation soared several years ago, said Isabella Weber, an economist with the University of Massachusetts, Amherst.

Implementing policies that cause the nation\u2019s most popular vehicle to suddenly be unaffordable would be deeply unpopular<\/a>. Trump saw Democrats lose power over inflation, Weber added, and he might come up with measures to avoid hitting US consumers with the cost, like forcing foreign companies to pay part of the tariff.<\/p>\n\n\n\n

\u201cPower will be their first goal,\u201d Weber said. \u201cInflation undermines this.\u201d<\/p>\n\n\n\n

Even with the potential cost shock, the tariffs seem to have some public appeal as a measure to protect the US auto industry. The message is especially potent when it comes to vehicles like the F-150, which holds cultural and emotional value. If Trump can implement policies to make the truck more American without hitting consumers with costs, it could be a huge win.<\/p>\n\n\n\n

\u201cThese are American companies and people have memories of them going back decades, so there\u2019s a lot there for people to grab on to financially and emotionally,\u201d Drury said. \u201cThat\u2019s why autos are always going to be top of mind when asking \u2018What are we are going to do to protect American industry?\u2019\u201d

Reprinted from The Guardian<\/p>\n","protected":false},"excerpt":{"rendered":"

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