Trump says he’ll protect US-made cars through steep tariffs, can he?

[ltlee1]

"The North American car industry has operated for decades as if the
continent is one giant country, thanks to free trade agreements signed
by presidents from Bill Clinton to Trump himself. Parts and whole
vehicles have flowed freely across borders, sometimes multiple times,
before they end up in an American dealership.

But Trump is promising to change that. ...

Trump’s plans would upend the US-Mexico-Canada Agreement, or USMCA, the
three-country trade deal he negotiated. ...

And it’s not just tariffs on goods from Mexico and Canada that are
raising concern. Trump’s promise to increase tariffs are China an
additional 10% beyond existing measures have the potential to make
plenty of cars more expensive, too. While China ships relatively few
cars to the United States, it is a major source of low-priced auto
parts.

Trump argues that the move would bring jobs back to the United States
by forcing manufacturers to close plants in other countries and open or
expand US plants. But the amount of parts that go into cars assembled
here would be difficult for American suppliers to replace, which would
make building a car at US auto plants much more expensive.
..
Finding domestic supplies for many of the imported car parts would be
difficult. Even if some are made here, there is not enough excess
capacity to replace production of the parts now being imported. And for
some of the less expensive goods, it’s not economical to make them at US
factories, paying US wages. It would be more economical to pay the
tariffs, and pass along the cost to car buyers.

Even if an American parts supply could be found, in most cases it would
be more expensive. ... And spending the time and money to build new
plants, assuming suppliers are willing and able to do so, would pose its
own challenges.
..
The tariffs would raise the cost of assembling vehicles at US plants.
And those increased costs would definitely hit car buyers who are
already spending nearly $50,000 on each new vehicle purchased here.

“Those costs … are not going to be absorbed by the automakers or
suppliers,” Jeff Schuster, global vice president of automotive research
at consultant GlobalData, told CNN. "

https://www.cnn.com/2024/11/27/business/car-prices-tariffs/index.html

[ltlee1]

The CNN article has made it clear that protecting US-made cars and
therefore American jobs are not easy. Tariff could certainly give
US-made cars a kind of price advantage. But there are other problems
such as supply-chain for all the parts needed to make cars. The same for
other manufacturing products.

Besides, it would be difficult to protect US made cars and jobs in the
absence of healthy infrastructures, especially railways.

"...there is another huge factor threatening the rebuilding of America’s
industrial base...

In order to make stuff in the U.S., you must be able to efficiently
transport not just finished goods to consumers but also lots of heavy
raw materials and components to your factories. For example, making EV
batteries in the U.S. requires making synthetic graphite, and making
synthetic graphite requires transporting huge volumes of feeder stock
like coal tar or petroleum coke, which are by-products of steel
production and oil refining. You can’t use trucks to move that much
heavy material for more than short distances—not even trucks running on
battery power. You need freight trains.

Yet our freight rail system is melting down. After being deregulated in
1980, freight railroads merged into a handful of giant monopolistic
systems that became highly profitable. Those profits, plus the lack of
regulation, in turn attracted financiers who over the past decade have
taken control of major railroads and forced them to adopt a new
predatory business model. Financiers are maximizing short-term profits
and returns to shareholders by effectively liquidating the rail system
through radical downsizing and degraded service, all while further
damaging the prospects for American manufacturing by charging higher and
higher freight rates.

To deal with their diminished capacity and crew shortages, railroads
have frequently imposed embargoes—refusals to accept new traffic—causing
freight to stack up in warehouses and in railcars that remain stranded
in yards and sidings for days and even weeks. At one point in 2023,
millions of chickens faced starvation because of Union Pacific’s failure
to deliver animal feed trains on time. Shippers who depend on railroads
are often reluctant to voice public criticism for fear of retaliation,
but through their trade associations they describe systematic breakdowns
in service that prevent them from growing."

https://washingtonmonthly.com/2024/10/29/train-drain/

[ltlee1]

Given America' structural weakness in boosting manufacturing, the
booming stock market is the only thing saving the US from a Stagflation.

[ltlee1]

While tariff is unlikely to save US job as Trump has imagined, fear over
Trump tariffs are sending Americans into debt.

"Fear Over Trump Tariffs Sending Americans Into Debt, Study Shows

Bloomberg) -- One in three Americans are stockpiling daily necessities
like toilet paper and non-perishable food out of fear that
President-elect Donald Trump’s pledge to add tariffs to imported goods
will lead to higher prices, according to a new survey.

Some 34% of respondents said they are stockpiling items because they are
“fearful or uncertain about the future,” according to a December report
from CreditCards.com, which publishes information on credit cards and
financial literacy. The organization in late November surveyed 2,000 US
residents.

Overall, the majority of respondents said they would use credit cards
for some or most of their purchases this holiday season, with three in
10 planning to go into or take on additional debt.

Of the 30% of shoppers that said they plan to buy more than usual this
holiday season, the top reason was fear of rising prices due to tariffs,
cited by 39% of those spending more.

Trump has repeatedly said he will impose tariffs on foreign goods,
vowing an additional 10% levy on products from China and 25% tariffs on
all items from Mexico and Canada. Economists have warned that tariffs
will likely raise prices on gasoline to lumber and send domestic
inflation higher."

https://www.yahoo.com/news/fear-over-trump-tariffs-sending-195503444.html