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article imageNorth American auto industry in crisis Canadian CEO claims

By Ken Hanly     Jun 29, 2018 in Business
Linda Hasenfratz, Chief Executive Officer (CEO) of Canadian parts supplier Linamar Corp. says that the North American auto industry is facing a crisis. When added to the existing tariffs on steel and aluminum Trump's added tariffs would be unbearable.
Effects of Trump's suggested tariffs
Last month, US president Donald Trump ordered an investigation into whether auto imports represent a national security threat a move that could eventually lead to tariffs on imported autos up to 25 percent. Hasenfratz said in an email: “Prices will have to be dramatically increased to consumers, consumers will stop buying and we will have a collapse in the automotive market. Clearly, this will lead to wide-scale layoffs, further decreasing demand for absolutely everything and spinning the U.S. into a deep, deep recession and dragging the rest of us down with them.”
Hasenfratz said that the situation would be worse than in 2009. Linamar's stock has been severely effected by recent trade uncertainty having lost 22 percent just since mid-May this year. Linamar has manufacturing facilities in 11 countries including the US and Mexico. Linamar is Canada' second largest car parts manufacturer with only Magna International being larger.
Hasenfratz does not support duties on countries other than the US to prevent a flood of products from producers in other countries trying to avoid the US tariffs. The new duties could be announced as early as next week. These tariffs are in addition to those already on US imports from steel, to boats, to even maple syrup.
Hasenfratz noted: “Tariffs are never good, add cost that ultimately hits the consumer and therefore hammer the economy in a broad sense.” She claimed that US metal tariffs are already raising costs for the auto industry and will ultimately result in layoffs. To add auto tariffs to these duties would be "the next and final step to economic disaster"
GM could become smaller as the result of the auto tariffs
The company, which employs 180,000 people, said the tariffs on imported vehicles that Trump is considering could lead to a smaller GM and also risked isolating US businesses from the global market. The company is the second one this week to warn of the dangers of the Trump trade policies.
Harley-Davidson motorcycles had already announced that the tariffs were forcing it to relocate some of its production overseas to serve the European market. This response infuriated Trump. He threatened to tax Harley-Davidson like never before.
GM said the tariffs could hike auto prices and reduce sales. Even if the car makers decided to pass on higher costs this could lead to less investments, fewer jobs, and lower wages.
Toyota also opposed any auto tariffs
Toyota also filed comments opposing the tariffs claiming that they would "threaten US manufacturing, jobs, exports, and economic prosperity." The company noted that Trump had recently praised the company for investing in the US and that included a new $1.3 billion joint venture with Mazda in Alabama.
Toyota said: “These investments reflect our confidence in the US economy and in the power of the administration’s tax cuts." The submission made the point that some of the international company's making autos in the US include allies such as Japan, Germany, and South Korea. It is difficult to imagine these countries being in armed conflict with the US leading to the cut off of supplies to the US. In any event the US could just seize their plants.
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