The United States imposed 25 percent rates on Saturday on imported car parts that could sharply increase prices for new and used vehicles and for repairs and insurance.
The last rates, which President Trump ordered in March as part of his plan to promote domestic production, come after the 25 percent taxes on imported cars that came into effect at the beginning of April.
This second tasks round on imported parts will have a broader impact because even cars in the United States often have engines, transmissions, batteries or other components in other countries.
The administration said on Tuesday that the rates were meant “to protect national security by stimulating domestic car production and reducing American dependence on the import of foreign cars and their parts.”
The rates for parts do not apply to components from Canada or Mexico, as long as those goods meet the requirements of a North -American trade agreement that is negotiated during the first term of Mr Trump. This deal requires, among other things, that a minimum percentage of the content of car parts comes from North -America.
The administration also said that imported car parts would do that are not subject to other chargesSuch as that on aluminum and steel. And companies that have made cars in the United States would be exempted for two years from paying part of the rates for imported parts.
Mr. Trump’s rates have already stimulated new car prices while customers were flowing to dealers to buy vehicles before the taxes came into effect. The rates have a wrinkle effect on the market for used cars, because more people are looking for affordable alternatives to new cars, which increases demand and prices.
The rates for new car parts are also expected to increase the costs of repairs and insurance premiums, because replacement parts become more expensive. The rising car prices will contribute to the total inflation that Mr Trump had promised to bring down.
The president has insisted that the rates reduce production to the United States. But even if that policy succeeds, consumers will still pay more for cars. Many goods, including many car parts, can often be made much cheaper in China, Mexico or other countries outside the United States.
“Many parts, such as fasteners, washing machines, carpet, wiring looms are simply not available – we can’t even buy those parts here,” Jim Farley, the Chief Executive of Ford Motor, CNN told this week.
Automakers and suppliers say it will take years before they move assembly lines. And it is unlikely that they will commit billions of dollars to domestic production because of uncertainty about the direction of trade policy.
Mr. Trump has often changed ideas about the size of rates and how to be applied. On Tuesday he changed some of the rules to enable car manufacturers to prevent tasks on some of the components that they import for two years. The measures offer the industry some lighting, but car prices will still rise by thousands of dollars, analysts said.
There will be unpredictable side effects. The financial stress can drive some suppliers bankrupt, creating parts shortages.
“Car suppliers are already in thin margins,” said Lenny Larocca, leader of the American car industry at the consultancy firm KPMG. “They cannot afford the full cost of 25 percent rates.”
Mr. Trump’s decision to release many parts of Canada and Mexico, however, will alleviate the burden for some companies.
The car industry accounts for around 5 percent of Mexico’s gross domestic product and employs around a million people in the country. Vehicles and parts are by far the largest export from Mexico to the United States.
“Kijn by Little, this haze will be clarified,” said Marcelo Ebrard, the Minister of Economy of Mexico, on Wednesday during an event with business leaders and diplomats. “What we are going to face is a situation that is not as disadvantageous as perhaps many had expected.”
In Canada, many parts manufacturers deliver car factories in that country, said Flavio Volpe, the president of the Automotive Parts Manufacturers’ Association. And the vehicles that make those plants are still hit with rates when they are exported to the United States.
“The health of the Canadian car part sector is that there is a cluster of production that we can deliver locally,” said Mr. Volpe.
On Friday, General Motors said that because of the rates it eliminated a third team at a pick -up -assemblage line in Oshawa, Ontario. That plant will now build more trucks for Canadians, the company said. Unifor said that the reduction would eliminate around 700 trade union courses and that parts makers would probably dismiss another 1,200 people.
Prime Minister Mark Carney said that GM’s decision was a ‘terrible manifestation’ of the economic crisis that had created Mr Trump’s rates for Canada.
The rates will hit some car manufacturers harder than others. Tesla and Ford are slightly less vulnerable. Tesla produces all the cars it sells in the United States in California and Texas. Ford says it makes almost 80 percent of the vehicles that it sells in the United States in their own country, including pickups of the F-series, the best-selling vehicles in the country.
General Motors will suffer more, analysts say, because imported parts are often good for more than half the value of Chevrolets or Cadillacs made in the United States. GM also imports cars from Canada, Mexico and South Korea.
Volvo cars, which has a factory in South Carolina, but uses many parts from China, will also be difficult to hit, analysts say.
Even companies that make vehicles in the United States will feel the pain. Rivian builds electric pickups in Illinois, but imports batteries from South Korea and China that will be subject to rates.
The rates are expected to shrink the range of cheaper vehicles. Almost 80 percent of the cars that are less than $ 30,000 are priced according to Cox Automotive to 25 percent rates, including popular vehicles such as the Honda Civic, Toyota Corolla and Chevrolet Trax.
Car prices will probably not shoot up immediately, because most car manufacturers and their dealers have large supplies of cars that were made before the rates came into force. Ford, Hyundai and Volkswagen belong to car manufacturers who have said that they will not increase prices for several months. But car manufacturers are not profitable enough to absorb the increased rates indefinitely.
Administration officials continue to discuss the rates with car manufacturers and the tasks can change. But the uncertainty is to create huge headache for car manufacturers. GM said on Thursday that the rates would cost it up to $ 5 billion this year. Other companies such as Stellantis and Mercedes-Benz have told investors that they can no longer make reliable predictions about sales and profit for 2025.
Ian Austen And Emiliano Rodríguez Mega contributed reporting.
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