- General Motors announced that the automaker will stop producing cars at three North American plants and reduce its salaried workforce by 15%.
- According to some analysts, GM’s move could convince President Donald Trump to move forward with tariffs on imported cars and trucks.
- But given Trump’s fickle approach to trade policy, a swift reaction isn’t guaranteed.
General Motors’ announcement that the company would shutter three North American factories – two in the US -could help inspire President Donald Trump to move forward with tariffs on imported cars and trucks.
Chris Krueger, a policy analyst at Cowen Washington Research Group, told Business insider that GM’s announcement on Monday could add more fuel to Trump’s desire to impose a 25% tariff on all cars, trucks, and auto parts coming into the US.
“Perhaps he does a mea culpa on his steel tariffs, but what seems far more likely is that he doubles down with auto and auto parts tariffs,” Krueger said in an email.
Trump has long wanted to slap import restrictions on cars coming from Europe, Japan, and other countries to provide a boost for American manufacturers. Gary Cohn, Trump’s former top economic adviser, has said the president asked him why all cars couldn’t be made in America.
The move would be economically devastating, economists say. A study from the Peterson Institute of International Economics found that a 25% auto tariff would cause auto production in the US to fall by 1.5% over the first three years and result in a net loss of 195,000 jobs.
Krueger’s thinking goes that Trump could use the announcement as an example of why the US needs the tariffs – to protect the remaining auto manufacturing jobs in the US.
“Protectionist arguments tend to win the day with Trump,” Krueger said.
But the president’s fickle nature on trade policy makes the timing and exact reason for any move a guessing game, said Ed Mills, a policy analyst at Raymond James.
“Trying to figure out whether Trump will impose tariffs is a little bit of presidential game theory and a little bit of psychoanalysis,” Mills said. “Will he see these headlines and try to reverse the job losses through tariffs? It’s hard to tell.”
Mills said that Trump has banked a lot on revitalizing the industrial sector in the US. Given that Trump has received the report necessary to impose the tariffs, Mills said, there’s certainly a chance the tariffs could be on the way.
While tariffs were not directly mentioned in GM’s announcement, GM recently reported that Trump’s tariffs on steel and aluminium will cost the company $US1 billion this year. Given this soaring cost pressure, there is a good chance that the tariffs played a part in GM’s decision, said Edward Alden, a senior fellow at the Council on Foreign Relations.
“I would guess that the import tariffs probably accelerated the move,” Alden told Business Insider. “GM is eliminating its lower margin passenger vehicles to concentrate on higher-margin products, and the rising cost of steel probably made made those lower margin vehicles even less attractive than they already were.”
But while Trump’s tariffs may have made an indirect contribution to GM’s decision, Alden said he doesn’t think that GM’s move will feed back to Trump’s auto tariff decision.
“With the possible exception of the steel and aluminium tariffs, I don’t think the administration generally uses tariffs to ‘protect’ beleaguered US industries,” Alden said. “The purpose is more to give the president a big club to try to force changes in the trading practices of other countries. So I don’t think this will make a difference.”
For his part, Krueger was confident that regardless the impetus for the move, there is only one outcome in the end.
“Tariffs are coming,” he said.
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