Trade War Watch: Mazda Joins Toyota in Condemning U.S. Tariff Proposals
Automakers are not thrilled with the White House’s current interest in automotive tariffs. With factories scattered across the globe, no major manufacturer would go untouched by the proposed increases in import duties or the retaliatory tariffs foreign governments may issue in response.
There’s a lot to lose from a financial perspective. According to a recent analysis from Evercore ISI, Fiat Chrysler would take an annual hit of $866 million if the United States placed a 25-percent import tariff on cars. Considering that other automakers stand to lose at least that much, it’s unsurprising they’ve begun raising their corporate voices over the matter.
Granted, the FCA example is a worst-case scenario for that particular brand, but even a lesser tariff would see a profit loss of hundreds of millions. For an automaker like Mazda, the loss would be far worse.
Automakers have begin making a stink about this. The Association of Global Automakers, a Washington-based trade group representing car manufacturers and parts suppliers, called the United States’ tariff proposal “the greatest threat to the U.S. automotive industry at this time.”
Toyota has already submitted comments to the Commerce Department rejecting the tariff proposals. “A 25 percent tariff on automotive imports, which is just a tax on consumers, would increase the cost of every vehicle sold in the country. Even the Toyota Camry, the best-selling car in America, made in Georgetown, Kentucky, would face $1,800 in increased costs,” Toyota said.
According to Bloomberg, Mazda followed up with statements of its own on Thursday. It asked the department to “reject the premise that auto imports are a threat to national security,” while simultaneously issuing a reminder that it employs 32,000 Americans citizens who work for Mazda via the brand’s dealerships.
The company doesn’t employ factory workers in the country because it doesn’t manufacture vehicles inside the U.S. Until it manages to finish its factory in Alabama, all of Mazda’s products have to be imported and, because of that, its entire lineup would be subject to import fees.
“A tariff is a tax and it will be paid by American consumers,” Mazda said. “It will significantly increase the cost of every new vehicle sold in America, regardless of where it is built.”
Presumably, the Commerce Department knows what’s at stake already. It keeps track of the total value of imported vehicle’s every single year and there is a lot of money tied up. Almost $40 billion dollars worth of car came into the United States from Japan alone last year.
[Image: Mazda]
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BAFO’s in Calcutta today. He’s looking at a cherry Tata Nano he found in the AutoTrader.
I think Toyota may have just shot itself in the foot by stating that tariffs would increase the price of a Camry by 1,800 dollars. This lends further credence to the argument that Toyota's plants in the U.S. are simply low-value-added assembly plants and not manufacturing plants, since most of the important high-value-added components are imported to the U.S. from Toyota's factories in Japan. A big criticism of Japanese automakers in America has always been that most of the Japanese cars sold there as "American made" have in fact very little in way of American content. This is detrimental to the U.S. economy and bad for American workers. According to The Japan Times (Trade heat from Trump makes Toyota’s test in U.S. even tougher, Feb 7, 2017): "Toyota still imports (to America) a significant proportion of high-value components like engines and transmissions, said Takaki Nakanishi, the top-ranked auto analyst for six consecutive years through 2009 in rankings by Nikkei Veritas...“Japan’s auto industry has not sufficiently localized operations in the U.S., its largest sales destination market,” Nakanishi, a Tokyo-based analyst for Jefferies Group LLC, wrote in a Jan. 30 report." In admitting that the price of its "American made" cars will go up significantly if tariffs are imposed, Toyota has in fact bolstered the case for tariffs, since imposition of tariffs will encourage foreign automakers like Toyota to manufacture more of their components in the U.S. This will help American manufacturing and create more high-paying jobs in the U.S.