Introduction
President Donald Trump, known for his unpredictable nature and controversial policies, has once again surprised both supporters and critics. Since taking office for his second term, he threatened to impose a tariff wall, but the firmness of measures announced in early April caught analysts and the market off guard, causing significant losses – some of the worst since the COVID-19 pandemic.
Tariff Announcement and Market Reaction
The severity of consecutive days of red figures compelled Trump to reverse course and postpone the implementation of reciprocal tariffs for 90 days, excluding China – his clear political and commercial rival – which he doubled to 125%.
Impact on US Industries
Numerous analysis firms have reported the significant impact these tariffs will have on American lives, affecting all categories of goods simultaneously. One such sector is the automotive industry, a key target for Trump to “recover” amidst the rise of global brands, mostly Asian, and the decline of local production and Detroit’s former giants.
The State of US Automotive Production
An All America report concluded that the production of US-made vehicles has been declining, dropping from 73% in 2007 by Ford, General Motors, and Chrysler to just 40% in recent years. Surprisingly, Honda’s vehicles are “more American” than those produced by these companies, incorporating more parts from Mexico and Canada.
Detailed Analysis of Vehicle Components
In 2007, 38% of vehicle components were made in the US and Canada; this figure fell to around 23% in 2023. The Kia EV6, a South Korean model, is the “most American” vehicle available, with 80% of its components sourced from US or Canadian industries. Honda’s Ridgeline AWD TrailSport follows closely with 75% of its production in the EU.
Impact on Other Countries
Nomura’s research report revealed that the tariff impact on the automotive and auto parts sector will be felt more strongly in countries with higher tariffs, such as China, Japan, the EU, Canada, and Mexico – Trump’s ongoing negotiation targets.
Key Questions and Answers
- What is the main issue Trump aims to address? Trump seeks to revive the US automotive industry, which has seen a decline in local production and rise of global brands.
- Who is Donald Trump? Donald Trump is the President of the United States, known for his unpredictable nature and controversial policies.
- What is the current state of US automotive production? The production of US-made vehicles has been declining, with only 40% of vehicles produced by major US companies originating from the US or Canada.
- Which countries and brands are most affected by Trump’s tariffs? Countries with higher tariffs, such as China, Japan, and the EU, along with negotiation partners Canada and Mexico, are most affected. Brands like Kia and Honda have a significant portion of their components sourced from the US or Canada, making them relatively resilient to these tariffs.
- What is the potential impact on India? While tariffs could affect India, there are expectations of mutually beneficial plays in the medium to long term, especially considering ongoing trade agreement discussions. The Indian government might even reduce tariffs on US vehicles as part of negotiations.
