You can’t move a production line, or rebuild a supply chain, in a month.
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They’re so excited they’re asking for tariffs to push a month!
My kids used to love it when I wouldn’t let them open their birthday presents until a month later. The anticipation was far better than the crappy gifts we got them…
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Making America Poor Again (MAPA)
The reprieve for automakers came after 25% tariffs were imposed on Tuesday on all imports from Mexico and Canada, where many cars are made. Some reports suggested the cost of vehicles could rise anywhere from $4,000 to as much as $12,000 for some cars.
With automakers unable to eat the entire cost of tariffs if imposed without killing margins, the expectation is that much of these costs will be passed on to the consumer. The Alliance for Automotive Innovation (AAI), a trade group representing the auto industry, claims almost the entire tariff will hit the sticker price.
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Seems like the automakers must have made a credible point about how intertwined their supply chains are, or, more importantly, how POed the UAW rank and file, who love TIG, would be if they were laid off because of tariffs on Mexican parts.
The beat goes on with other Canadian products, probably including lumber, potash, oil and gas, which do not have such a complex supply chain.
Steve
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Autoworkers union cheers Trump’s ‘aggressive’ tariff actions
https://thehill.com/business/5175952-uaw-trump-tariffs-china-mexico-canada/
The United Auto Workers (UAW) union said it supported President Trump’s Tuesday tariffs, offering a full backing for the “aggressive” action seeking to alter past trade agreements with neighboring countries.
“Tariffs are a powerful tool in the toolbox for undoing the injustice of anti-worker trade deals,” the union wrote in a Tuesday statement.
DB2
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But that is not always what is necessary.
You can add capacity in the US. You can move American workers back from Mexico and Canada to the US. It may not all happen within one month but much of what can be done will keep tariffs on the units produced lower after the month is up.
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Yup. Add an extra shift at the Ohio plant and reduce production in Mexico. Every bit helps.
DB2
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Not so easily done, when you need to physically expand a plant. You know what happens when you build a big plant? The city immediately grows around it, so there is no expansion room.
Moving production from Mexico to a US plant, if capacity is available, takes time. From when FCA announced, some years ago, they would move the Jeep Cherokee from Toledo to Belvidere, a year passed, before the first Jeeps rolled out of Belvidere. iirc, that move cost some $350M too.
Steve
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Of course, he is expecting a slowdown so the math works for him.
The tariffs also apply to auto parts, which complicates this strategy. And parts that make up component assemblies. So if you have U.S. steel that gets exported to Mexico to make a screw, which gets exported back to the U.S. to be part of a bracket assembly, which gets exported back to Mexico to be part of a bracket, which gets exported back to the U.S. to be put in a seat assembly, which gets exported back to Mexico to be made into a car for export to the U.S. market…then moving just that last step back to the U.S. only addresses part of the disruption.
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Moving auto manufacturing back to the U.S. is a tariff by another name.
The whole point of moving manufacturing to Mexico (or elsewhere) in the first place was to save money. If you now build cars in the U.S. they’re going to be, by definition, more expensive to build and therefore, more expensive to consumers.
Assuming that most consumers have a budget or are constrained by how much they earn, that means the extra money spent on cars (plus interest if they take a loan) won’t be spent on food, clothes, appliances, (or go to savings), etc. which means some number of people in those industries will lose jobs.
Anyway you spin it, it becomes inflationary to consumers (like a tariff) and some of the increased jobs created to manufacture cars will be partially offset by job losses elsewhere.
E = MC2. You can change the numbers, but you can’t change the formula.
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That is the same argument heard when unions demand large pay increases.
DB2
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It depends.
If the increases come from excess profits and excessive executive pay (ha ha, I made a funny), it’s not inflationary.
If it comes from raising the costs of products sold, it’s inflationary.
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There are not that many production line workers sent by the US companies to Mexican companies. So moving that moderately small number of workers back to the US does nothing. Let’s wait until the layoffs begin (everywhere). THEN it gets “interesting”.
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The flip side? Oh!!!
Putting this in a better thread for it.
Well it is too late other countries are going elsewhere.
The other countries are not going to give exemptions necessarily either.
This will get straighted out…bahbahbahbahbah
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