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Automotive Tariffs and the New Economy in USA

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  • Brooks, AB
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    With an unpredictable president threatening to tear up NAFTA, the automotive industry in North America could be heading for a great re-alignment, which will benefit American workers a decade from now.

    Currently, many vehicles manufactured in North America have components from all three countries: USA, Canada, and Mexico. While there may a country of final assembly, there really is no true country of origin.

    If a 25% tariff on all cars deemed to be Canadian (and that can be defined in so many ways), cars across North America are going to be more expensive than before. Not only will the tariffs add to the costs, but the manufacturers will lose their efficiencies from their various plants working together across borders.

    In time, the manufacturers will come to the conclusion--that to be more competitive than their competion--they need to move more and more manufacturing from Canada and Mexico into the USA. When a car is now made totally in the USA, there will be no tariffs in American cars sold in America.

    Canada could impose a counter tariff. But this will cause more hardship for Canadian consumers than entice the auto industry to stay in Canada. But when the manufacturers pull out of Canada, Canadian auto consumers will still be forced to buy American cars (even Japanese designs are mostly made in North America).

    In the end, auto workers who worked the line in Ontario and Quebec will be handing over their jobs to Americans. The Canadian market for American cars will really not disappear. In a decade, the new economy will stabilize, prices will come back to normal--and all manufacturing will be done in the USA. This master plan will make America great again!

  • Liberal Democrat
    Democrat
    Kenosha, WI
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    As with any assembled product, car, motorcycle or truck, if tariffs are imposed, the consumer will end up paying more, this does not make Amerika great, it makes Amerika a shithole. BTW, when those vehicles aren't selling and production is cut, that will make automakers produce less, and that will end up in autoworker layoffs. Nobody wins.
  • Brooks, AB
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    Dockadams Wrote: As with any assembled product, car, motorcycle or truck, if tariffs are imposed, the consumer will end up paying more, this does not make Amerika great, it makes Amerika a shithole. BTW, when those vehicles aren't selling and production is cut, that will make automakers produce less, and that will end up in autoworker layoffs. Nobody wins.

    Production indeed will be cut back in the first five years, even in the United States. That will effect various "economies of scale" in the industry, giving another reason for car prices to increase.

    Tariffs will be great for auto parts recyclers. We will keep our cars on the road a little longer, so we will need this part of the auto industry to help us to do that.

    But getting back to the original post, I'm sure it is plausible to move the entire auto manufacturing into the USA. But I don't think the Trump administration is thinking that far ahead.

  • Strongly Liberal Democrat
    Democrat
    Pensacola, FL
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    Dave Volek Wrote:
    Dockadams Wrote: As with any assembled product, car, motorcycle or truck, if tariffs are imposed, the consumer will end up paying more, this does not make Amerika great, it makes Amerika a shithole. BTW, when those vehicles aren't selling and production is cut, that will make automakers produce less, and that will end up in autoworker layoffs. Nobody wins.

    Production indeed will be cut back in the first five years, even in the United States. That will effect various "economies of scale" in the industry, giving another reason for car prices to increase.

    Tariffs will be great for auto parts recyclers. We will keep our cars on the road a little longer, so we will need this part of the auto industry to help us to do that.

    But getting back to the original post, I'm sure it is plausible to move the entire auto manufacturing into the USA. But I don't think the Trump administration is thinking that far ahead.

    I have always condemned stealing jobs from other countries. Paying for good times here by stealing from other countries is immoral. It is especially atrocious because good times are possible everywhere by putting money to work investing in jobs producing businesses. All the world's economic policies revolve around accumulation of money rather than improvements of society.
  • Independent
    Ft.myers, FL
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    They (Trump) probably forget that lots of European cars are built here; putting tariffs on European cars will have as effect that they no longer will built them here, which means lots of jobs lost. Does Trump care; I guess not.
  • Brooks, AB
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    Chet Ruminski Wrote:
    I have always condemned stealing jobs from other countries. Paying for good times here by stealing from other countries is immoral. It is especially atrocious because good times are possible everywhere by putting money to work investing in jobs producing businesses. All the world's economic policies revolve around accumulation of money rather than improvements of society.
    My primitive economics training says that goods should be produced in countries that the economic advantage to produce those goods. So, yes, textiles are better produced in Pakistan rather than USA. Trouble is that the business people in Pakistan are getting filthy rich (taxes are easily avoided) while their workers carve out subsistence wages.
  • Brooks, AB
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    Dutch Wrote: They (Trump) probably forget that lots of European cars are built here; putting tariffs on European cars will have as effect that they no longer will built them here, which means lots of jobs lost. Does Trump care; I guess not.
    My understanding is that the Trump administration abandoned putting tariffs on European cars. Maybe because for the reasons you stated, but I think the EU has a much bigger stick than Canada. The USA can win a trade war with Canada, but both USA and EU will lose in their trade war.
  • Independent
    Ft.myers, FL
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    Don't forget about what happened in the past; GM and Chrysler had to be rescued; Ford did hang on by a thread. If you look at the stock prices of these companies, then it shows that they are still very weak ( Ford about $9 a share; however Tesla over $300 a share which is an "dream along" stock) Thus tinkering with "tariffs" could have huge consequences for this industry. Trump still threatens to put additional "tariffs" on European built cars, if Europe does not want to import more US made cars. Read my piece about "why" that Europe does not want US cars.

  • Strongly Liberal Democrat
    Democrat
    Pensacola, FL
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    Dave Volek Wrote:
    Dutch Wrote: They (Trump) probably forget that lots of European cars are built here; putting tariffs on European cars will have as effect that they no longer will built them here, which means lots of jobs lost. Does Trump care; I guess not.
    My understanding is that the Trump administration abandoned putting tariffs on European cars. Maybe because for the reasons you stated, but I think the EU has a much bigger stick than Canada. The USA can win a trade war with Canada, but both USA and EU will lose in their trade war.
    Trump has no concept of the reality of a trade war. One of his first candidate statements when asked about raising the minimum wage was no. He said he wanted to keep American wages low to be competitive. He had said American wages are to high. He is the number one flag waver hiding his greed and corruption behind the flag.
  • Brooks, AB
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    Dutch Wrote:

    Don't forget about what happened in the past; GM and Chrysler had to be rescued; Ford did hang on by a thread. If you look at the stock prices of these companies, then it shows that they are still very weak ( Ford about $9 a share; however Tesla over $300 a share which is an "dream along" stock) Thus tinkering with "tariffs" could have huge consequences for this industry. Trump still threatens to put additional "tariffs" on European built cars, if Europe does not want to import more US made cars. Read my piece about "why" that Europe does not want US cars.

    Adding tariffs to the automotive industry is going to cause great dislocation of this economy, especially if it is around the 25% value. The added tariffs, the bureaucracy created to accurately assess the tariff, the loss of economies of scale because of lower sales, and the loss of certain business efficiencies because car parts are moving across borders are going to increase prices beyond whatever the tariff is set at. And American consumers will be subject to these increases because it is quite improbable that the manufacturers can pick up all their factories and move them out of Canada in a short period of time.

    But in ten years time, all automotive manufacturing in Canada will have moved into the United States. Canada will be an important market for the USA to sell its cars. The only tariffs will the tariffs imposed by the Canadian government for American cars. And Canadian consumers won't like that tariff.

    I'm not sure the Trump administration is thinking this far ahead.

  • Strongly Liberal Democrat
    Democrat
    Pensacola, FL
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    "I'm not sure the Trump administration is thinking this far ahead."

    Understatement award.

  • Liberal Democrat
    Democrat
    Kenosha, WI
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    Dave Volek Wrote:
    Dockadams Wrote: As with any assembled product, car, motorcycle or truck, if tariffs are imposed, the consumer will end up paying more, this does not make Amerika great, it makes Amerika a shithole. BTW, when those vehicles aren't selling and production is cut, that will make automakers produce less, and that will end up in autoworker layoffs. Nobody wins.

    Production indeed will be cut back in the first five years, even in the United States. That will effect various "economies of scale" in the industry, giving another reason for car prices to increase.

    Tariffs will be great for auto parts recyclers. We will keep our cars on the road a little longer, so we will need this part of the auto industry to help us to do that.

    But getting back to the original post, I'm sure it is plausible to move the entire auto manufacturing into the USA. But I don't think the Trump administration is thinking that far ahead.

    Don't forget the collateral damage that making less vehicles would cause, that is why the Obama administration bailed out the auto industry when they were failing. Tariffs along with producing less would hurt any businesses which support the operations of production. To be more specific, brake linings, brake hoses & lines makers, muffler and catalyst makers, and other parts not made by the automakers themselves would be affected. Parts to assemble those vehicles come from everywhere, so their output would suffer too.

    Did we like government intervention to bail out the auto industry? No. But it was a case of damned if you do, damned if you don't. I think the Obama administration did the right thing, but I didn't like our government bailing out the banking industry at all. Especially when some bank/s received as much as $700M to stay afloat the same day or day after, and then banking CEO's received bonuses for running their operations into the gutter. Rewarding for failure. But if the last administration didn't bail them out, the economy would probably have tanked even deeper.

  • Independent
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    Dave Volek Wrote:

    With an unpredictable president threatening to tear up NAFTA, the automotive industry in North America could be heading for a great re-alignment, which will benefit American workers a decade from now.

    Currently, many vehicles manufactured in North America have components from all three countries: USA, Canada, and Mexico. While there may a country of final assembly, there really is no true country of origin.

    If a 25% tariff on all cars deemed to be Canadian (and that can be defined in so many ways), cars across North America are going to be more expensive than before. Not only will the tariffs add to the costs, but the manufacturers will lose their efficiencies from their various plants working together across borders.

    In time, the manufacturers will come to the conclusion--that to be more competitive than their competion--they need to move more and more manufacturing from Canada and Mexico into the USA. When a car is now made totally in the USA, there will be no tariffs in American cars sold in America.

    Canada could impose a counter tariff. But this will cause more hardship for Canadian consumers than entice the auto industry to stay in Canada. But when the manufacturers pull out of Canada, Canadian auto consumers will still be forced to buy American cars (even Japanese designs are mostly made in North America).

    In the end, auto workers who worked the line in Ontario and Quebec will be handing over their jobs to Americans. The Canadian market for American cars will really not disappear. In a decade, the new economy will stabilize, prices will come back to normal--and all manufacturing will be done in the USA. This master plan will make America great again!

    Why would they be forced to buy American cars? Why wouldn’t Japanese, Korean, German or even possibly Chinese automakers open plants in Canada? Once you go the free trade route it is almost impossible to undo it. As for comparative advantage there is no such thing. Countries, especially first world and rapid developers want to do just about everything.
  • Strongly Liberal Democrat
    Democrat
    Dallas, TX
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    Exports are a cost and imports are a benefit. Cheaper cars make the American consumer better off. Yes, that means less domestic car building and automotive sector employment, but that doesn’t mean less total employment. The unemployment level in the economy is a political choice.
  • Brooks, AB
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    lonely bird Wrote:

    In the end, auto workers who worked the line in Ontario and Quebec will be handing over their jobs to Americans. The Canadian market for American cars will really not disappear. In a decade, the new economy will stabilize, prices will come back to normal--and all manufacturing will be done in the USA. This master plan will make America great again!

    Why would they be forced to buy American cars? Why wouldn’t Japanese, Korean, German or even possibly Chinese automakers open plants in Canada? Once you go the free trade route it is almost impossible to undo it. As for comparative advantage there is no such thing. Countries, especially first world and rapid developers want to do just about everything.

    Good question. There is no doubt Canadians will still have lots of choice to buy cars from other countries. If an American car exported from the USA is tariffed at 25%, that makes importing from other places more competitive.

    While there are already dealerships selling non-NAFTA cars in Canada, this distribution system will have to be expanded greatly to satisfy the Canadian market. I can see many facilities for GM, Ford, Chrysler dealerships being converted into BMW, Kia, etc. Again, this would be an economic dislocation that really was not necessary.

    As far putting new automotive factories in Canada, I would say there is a small chance of that happening. If a car is manufactured in Canada, it only has the Canadian market (37 m people) to sell to. It can't be sold to the USA because of the tariff; it can't be sold to the home country because of transportation costs can't compete with cars already manufactured in the home country. I think most car manufacturers will sell their cars under whatever tariffs the Canadian governments impose rather than build their own factories to serve solely the Canadian market.

    But there maybe be a few such factories. For example, a Canadian built pickup truck will dominate the market for pickup trucks because its sticker price (without a tariff) will be cheaper for Canadians than an American built pickup truck. But Canadians won't have a lot of good choices. It is unlikely a competitor for the same model will set up a factory in Canada as well.

    And we need to remember, that is no longer just one factory anywhere in teh automotive world. Cars today come from multiple factories. It is hard to see one manufacturer building several factories to serve one or two models in one country. No, I think the manufacturers will stay out of Canada entirely than to build up an extensive web for building a car.

    The only choice the Canadian government will have is to continue with the tariff on American cars--in retribution for decimating the Canadian automotive industry or let the tariff go to be easier on Canadian consumers.