Countries Continue to Debate Car Tariffs, With Negotiations and Threats

The tariff wars continue — and it looks like it’s going to be America vs. the rest of the world.

Automobile tariffs have been discussed for the last few months, but the discussion has become angrier and more serious as time has gone on. Presently, countries are waiting to find out what the decision will be — and they’re already planning their reactions. Multiple counties have banded together and promised some type of response in the event that auto tariffs do come into fruition.

The World is Poised to React
Japan, South Korea, Canada, Mexico, and the EU are all planning ahead regarding what they’re going to do if these heavy auto tariffs come into effect. Tariffs have been suggested at a rate of up to 25%, which would essentially bring the import market grinding to a halt. Some of these countries have discussed levying large tariffs on the United States instead, on other goods that the U.S. might require. Another solution that has been raised is fighting the United States at the World Trade Organization.

It’s unknown by many — including the countries involved — whether these tariffs are serious, whether they will be implemented, and whether they will be as high as has been suggested. This has kept countries off-guard and unable to respond in kind, as they are still waiting for a final verdict to be rendered. A verdict is not likely to come through until investigations into the presidential office have been completed, within the next few months. Nevertheless, the pre-planning being done by the affected countries shows that the countries are taking this issue extremely seriously.

So, What’s With the Tariffs?
Politically inclined citizens will recall that the Rust Belt was instrumental in the last presidential election. Many pundits believe that Hilary Clinton lost to Donald Trump because the DNC failed to recognize the importance of this voting block. Rather than concentrate on the blue collar workers who had suffered under the prior administration, the DNC instead decided to focus on key areas that, in effect, they had already won.

This is important to remember because many of these tariffs and trade restrictions are directly in line with the campaign promises that had been made during the election. The U.S. steel industry and automotive industry has been suffering due to low cost imports. At this point, the only way to bolster this American industry may very well be by restricting outside trade, though this will ultimately have the effect of increasing costs for vehicles in America.

The EU and the US Meet
Some trade concerns have been temporarily staved off due to the EU and US negotiations this week, which appear to have gone amicably. The EU and US meeting was primarily designed to prevent a continued escalation between the United States and China, which has become extremely aggressive and a concern on a global scale. At the same time, the EU and US decided to attempt to resolve the trade restrictions placed between the two countries, though this would be done on a later timeline.

Presently, the US still has a tariff on aluminum and steel imported from the EU, while the EU has introduced tariffs on an assortment of food, beverages, cigarettes, clothing, and motorcycles. These retaliatory tariffs are becoming more common as time goes on.

American auto manufacturers may be seeing better days should these car tariffs come into play, though there are some questions as to whether they’ll have enough raw materials to go around — tariffs on products such as steel and aluminum could make it more difficult for domestic and expensive for domestic manufacturing. Related to this, domestic steel and aluminum companies are likely to see dramatically increased demand — potentially levels they cannot meet.

Meanwhile, it may be that keeping countries guessing on the global market is exactly the ploy at hand. Auto makers throughout the globe are currently destabilized without the knowledge of how much they should manufacture for the current U.S. market. Even if tariffs aren’t introduced regarding the automobile market moving forward, this could still prove to be a disadvantage to importing companies.


Ethan Warrick
Wealth Authority