- President Donald Trump’s tariffs are starting to weigh on the the world’s largest automakers.
- BMW, Ford, and Honda have all issued warnings about the tariffs’ impact on their businesses over the last few days.
- The pain could get worse, as the Trump administration is still mulling tariffs on imported cars.
Evidence is mounting that automakers are taking a hit from President Donald Trump’s tariffs, and the car companies say the worst may be yet to come.
Large automakers including Ford, Honda, and BMW say they are all reeling from the effects of the tit-for-tat tariffs between the US and China, as well as Trump’s tariffs on all steel and aluminium tariffs coming into the US.
The latest example came from Ford, which announced last week that it would be forced to lay off employees as it cuts costs. Some of the impetus for the layoffs is a restructuring program the company is undertaking, but recent sales woes in China and increased material costs are also driving some of the automaker’s pain.
Ford CEO Jim Hackett told an audience at a Bloomberg conference that the steel and aluminium tariffs will cost the company $US1 billion in 2018 and 2019.
“From Ford’s perspective the metals tariffs took about $US1 billion in profit from us,” Hackett said. “The irony of which is we source most of that in the US today anyway. If it goes on any longer, it will do more damage.”
Sales of Ford cars in China have also tanked in 2018 – the company reported a 43% decline for the month of September compared to the same month in 2017, as well as a 30% fall during the first nine months of the year compared to the same time period in 2017.
BMW is facing similar problems
BMW, which produces its X3 and X5 SUVs at a plant in Greer, South Carolina, is dealing with similar Chinese sales woes because of the trade war.
The South Carolina-made BMW models are hugely popular in China but are also now subject to retaliatory tariffs from the Chinese government that came in response to Trump’s duties on $US250 billion worth of Chinese goods.
It appears the tariffs are slowing down BMW’s exports, according to the Charleston Post and Courier. Auto exports from the Port of Charleston dived roughly 35% in August compared to the same month in 2017, according to the Post and Courier. And auto exports are down over 30% from the port in the first two months of the trade war kicking off in earnest.
Much of the auto exports from South Carolina are the BMWs and $US2.4 billion of the $US6.3 billion shipped from Charleston to China in 2017 were BMWs.
“The continuing international trade conflicts are aggravating the market situation and feeding uncertainty,” BMW told The Post and Courier.
Other factors contributed to the decrease, such as BMW’s shift to a new generation of its X5 – one of the most popular models from the South Carolina plant – but the company said the tariffs were a significant reason for the slowdown in sales to China.
‘Hundreds of millions of dollars in new, unplanned cost’
Rick Schostek, executive vice president for Honda North America, expressed similar concerns about the steel tariffs during a Senate Finance Committee hearing in late September.
“So, while we’re paying relatively little in the way of tariffs on steel, the price of domestic steel has increased as a result of the tariff, saddling us with hundreds of millions of dollars in new, unplanned cost,” Schostek said.
In both cases, the increased costs are due to the tariffs but also their second-order effects. Schostek told the committee that 90% of Honda’s steel used in US cars is domestic. But as the tariffs have pushed up prices for imported steel, domestic steel producers have increased their prices.
In the background of these losses is the looming threat of an even bigger hit to automakers. The Trump administration is researching the possibility of imposing tariffs on imported autos and auto parts, a move almost every single automaker has warned would wreck the industry.
Business Insider Emails & Alerts
Site highlights each day to your inbox.