New York: Every American automotive plant depends on Mexican parts to manufacture cars or trucks. President Donald Trump’s threats to enforce tariffs of up to 25.0% on Mexican part imports by October is already jolting the U.S. auto industry. The tariffs could escalate the costs of cars in the United States by billions of dollars, which would probably be borne by the customers.
The escalated price would hurt the car sales, perhaps lowering the U.S. auto production by around 3.0 million vehicles a year, an 18.0% drop from the present levels, estimates Emmanuel Rosner, an auto analyst for Deutsche Bank.
Last year, the U.S. imported around $59.4 billion worth of parts from Mexico, according to the U.S. government’s trade data. One of the most important auto parts imported from across the border is the wire harness, which is the network of wires which transfers electric current throughout the vehicle.
“It’s one of the first pieces you install when you’re assembling a car” Kristin Dziczek, Vice President of Industry, Labor and Economics Group at the Center for Automotive Research, had said in April when Trump first wanted to shut down the border with Mexico altogether. Such a step would have closed the entire U.S. automotive industry within a week, she estimated.
A 25.0% tariff on Mexican product imports would add nearly $28 billion a year to the final cost of parts and vehicles. Further, the cost would surge even if Mexico reverted by imposing tariffs on American goods imports. That would result in a double blow to the U.S. automotive sector, as Mexico is a significant market for both its cars and its parts.
Last year, Mexico purchased 140,600 cars from the U.S. which cost $3.3 billion. This was around 8.0% of all cars exported from the U.S., making Mexico the fourth-largest market for American-made cars after China, Germany, and Canada, as per the U.S. commerce department.