According to the Nihon Keizai Shimbun, analysis shows that the protectionist policy that Donald Trump, the next president of the United States, intends to implement may increase the annual production cost of American cars by 40 billion dollars, and hinder the development of decarbonization and artificial intelligence technology in the United States.
Trump plans to impose tariffs of "10% to 20%" on all imported products and impose additional tariffs on certain specific products. The President of the United States can increase tariffs by exercising the International Emergency Economic Powers Act without the need for congressional approval.
The high import tariffs that Trump intends to impose will have a significant impact on the US automotive industry. The annual car sales in the United States reach 15 million units, second only to China. Among them, many cars in the United States are imported from Mexico, Canada, and Japan, and the increase in import tariffs will lead to an increase in car prices.
These import tariffs not only apply to complete vehicles, but also to automotive parts. Thanks to the US Mexico Canada Agreement, Mexico was previously exempt from US import tariffs. From January to June this year, the number of imported automotive parts from Mexico accounted for 41% of the total number of imported automotive parts in the United States. Due to the trade tensions between the United States and China, car manufacturers have increased their purchases from Mexico instead of China, but now Mexico is facing the risk of high import tariffs from the United States.
Recently, Toyota announced plans to invest $1.45 billion in Mexico to increase production of the next generation Tacoma pickup truck for the US market. But the future is still full of uncertainty.
According to AlixPartners, a US consulting firm, imposing high tariffs on imported automotive parts could increase the production cost of each US made car by up to $4000. Based on the annual production scale of 10 million cars in the United States, this will increase costs by $40 billion.
If Trump imposes high import tariffs, not only will the automotive industry be forced to increase production in the United States, but other manufacturing industries such as steel and machinery will also have to do so.
The Tax Foundation, a think tank in the United States, estimates that in the long run, US import tariffs could increase US revenue by $3.8 trillion. But some people are concerned that companies serving American customers may cover higher costs by raising prices.
In addition, the renewable energy industry will also face price increases. Trump believes that reducing energy costs is the trump card to prevent inflation from resurging. For this reason, he may encourage increased production and new development of fossil fuels, and plan to expand exports of liquefied natural gas.
Trump also suggested withdrawing from the Paris Climate Change Agreement, which goes against the global trend. The Biden administration has attracted a total of $265 billion in decarbonization investments from domestic and foreign companies through massive subsidies, but some of these investments may be withdrawn.
Additionally, Trump's support for renewable energy generation may decrease. The Industry Research Department of Mizuho Bank stated that Trump's tough stance on offshore wind power may lead to the suspension of related projects.
People hope that the relaxation of regulations and tax cuts implemented by Trump after taking office again can reduce operating costs. At the same time, people also expect the Biden administration's strengthened scrutiny of mergers and acquisitions by domestic American companies to be relaxed during the Trump administration.
But the cost increase brought by the inward looking trade policy of the United States may offset these benefits. Trump has been promoting the practice of "America First", which has been described as "unilateralism". If he takes office again, he may adopt more radical measures to regain opportunities for employment and industrial development in the United States.
It can be said that Trump's policy direction focuses on practical interests. His inward looking trade policy may also change with diplomatic negotiations. Faced with such uncertainty, companies need to be prepared for various situations.