Trump wants 100pc tariff on Mexican-Chinese cars

FORMER US president Donald Trump has threatened to impose a 100 per cent tariff on Chinese vehicles built in Mexico if re-elected.

Addressing Chinese president Xi Jinping directly during a rally speech in Ohio this weekend, Mr Trump said he would double the vehicle levy he had previously proposed on vehicles built in Mexico, while also threatening a 50 per cent tariff on Chinese cars produced elsewhere, a 60 per cent tariff on “all other Chinese-made goods” and a 10 per cent tariff on goods produced outside of the United States.

“Those big monster car manufacturing plants you are building in Mexico right now and you think you are going to get that – not hire Americans and you’re going to sell the car to us, no,” said Mr Trump.

“We are going to put a 100 per cent tariff on every car that comes across the lot … You screw us, we’ll screw you. It’s very simple, very fair.”

Mr Trump continued by saying there would be a “bloodbath” if he did not win this year’s US presidential election, a point President Joe Biden’s campaign spokesperson James Singer criticised in response.

“This is who Donald Trump is: a loser who gets beat by over seven million votes and then instead of appealing to a wider mainstream audience, doubles down on his threats of political violence,” he said.

“He wants another January 6,” he said, referring to the storming of the US Capitol building. “But the American people are going to give him another electoral defeat this November because they continue to reject his extremism, his affection for violence, and his thirst for revenge.”

Passenger vehicles imported into the United States currently face a 2.5 per cent import tariff and motorcycles 2.4 per cent. Goods carrying vehicles – including vans and trucks – are hit with a 25.0 per cent fee. Mr Trump has previously proposed that all vehicles produced outside of the United States may move to adopt the 25.0 per cent tariff model.

However, and according to an article published by Atradis Risk Management, the upward momentum of the global automotive sector is being impacted by what it says are ‘threatening trends’, which include the protectionist initiatives set in place by the former Trump administration against Chinese-sourced vehicles, automotive components, and raw materials.

The article warns that the implementation of further knee-jerk-style policies will result in further supply chain disruptions as vehicle manufacturers source alternatives to those already established.

Such drastic restructuring could take as long as 10 years to fully stabilise.

Further, the article suggests that quality, accuracy and timeliness of materials and components could suffer, placing a flow-on effect to the finished product – not to mention significant increases in costs, which would be passed along to the consumer.

“Based on these moves, we forecast reduced profitability and lower production across the US auto manufacturing sector,” said the Atradis Risk Management article.

“These trends will only be exasperated if the additional auto industry tax is enforced. Any future imposition of tariffs on cars parts and vehicle imports would severely impact the industry, most probably leading to increasing insolvencies.”

The article suggests such a tax could result in a two-million-unit reduction in vehicles sold and associated job losses of more than 700,000 across the sector. It also estimates per unit price increases of 21.3 per cent, increases that are also expected to increase vehicle repair and maintenance costs.

As well as China, the article also warns that markets including Canada, Germany, Japan, Mexico, and South Korea would be negatively impacted by increased import tariffs.

Canada’s automotive industry accounts for 23.0 per cent of its manufacturing trade and is its second-most lucrative export behind energy products. Almost 96 per cent of all vehicles produced in Canada are sold to the United States.

German OEMs, which produce some 1.6 million vehicles combined in the United States each year – and imports a further 500,000 – will also be impacted by levies applied to its imported vehicles, components, and raw materials. Any policy change is likely to increase vehicle pricing.

For Japan, the article suggests that over four-million vehicles imported into the US each year would be impacted, the tax on components and raw materials also adding to the cost for OEM’s US-based production facilities.

It is also clear that increased tariffs would prove problematic for the Mexican automotive industry. As many as 75 per cent of Mexico’s vehicle imports are sold to the United States, with just five manufacturers currently meeting the 75 per cent rule of origin requirement.

Any change here is likely to “be folded into the list price of exported vehicles”, the article suggests.

And it’s a similar story for South Korean OEMs. Almost 10 per cent of the country’s GDP – and the jobs of two million people – is reliant on the automotive sector. It is estimated that vehicle exports to the US represent some $US16 billion in trade, the company also producing vehicles in both the United States and Mexico for the US market.