General Motors, along with many other automakers, saw stock fall after President Donald Trump announced new tariffs on foreign steel and aluminum. For steel, President Trump plans for a 25 percent tariff and a 10 percent tariff on aluminum, CNBC reported on Thursday.
GM stock fell 4 percent following the announcement and the automaker quickly issued a statement reiterating its supply chain practices.
“We purchase over 90 percent of our steel for U.S. production from U.S. suppliers,” GM said in a statement. The tariffs, therefore, wouldn’t affect the automaker significantly.
President Trump declared poor trade trends have “destroyed” American steel and aluminum companies and pointed to various nations such as China as the problem. Most of the United States’ imported steel comes from neighboring Canada.
The entire market reacted to the news with shares for companies such as Boeing and Caterpillar also dropping. Many investors fear a trade war as U.S. allies have already threatened retaliation with tariffs on various American products. The traditional sense is that consumer prices on goods, such as automobiles, will rise as imported steel and aluminum become more expensive at the cost of protectionism.
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Wonder if/how this affects GM/SAIC, Envision, etc?
Automakers Stocks Fall As President Trump Announces New Tariffs On Steel, Aluminum
There, Fixed it for you Sean!
Airlines and canned beverages and others dropped, too …
In case anyone is wondering, here is what Rupert Murdoch’s Wall Street Journal has to say of the move:
Apparently Mr. Trump can’t stand all this winning. His tariffs will benefit a handful of companies, at least for a while, but they will harm many more. “We have with us the biggest steel companies in the United States. They used to be a lot bigger, but they’re going to be a lot bigger again,” Mr. Trump declared in a meeting Thursday at the White House with steel and aluminum executives.
No, they won’t. The immediate impact will be to make the U.S. an island of high-priced steel and aluminum. The U.S. companies will raise their prices to nearly match the tariffs while snatching some market share. The additional profits will flow to executives in higher bonuses and shareholders, at least until the higher prices hurt their steel- and aluminum-using customers. Then U.S. steel and aluminum makers will be hurt as well.
Mr. Trump seems not to understand that steel-using industries in the U.S. employ some 6.5 million Americans, while steel makers employ about 140,000. Transportation industries, including aircraft and autos, account for about 40% of domestic steel consumption, followed by packaging with 20% and building construction with 15%. All will have to pay higher prices, making them less competitive globally and in the U.S.
Instead of importing steel to make goods in America, many companies will simply import the finished product made from cheaper steel or aluminum abroad. Mr. Trump fancies himself the savior of the U.S. auto industry, but he might note that Ford Motor shares fell 3% Thursday and GM’s fell 4%. U.S. Steel gained 5.8%. Mr. Trump has handed a giant gift to foreign car makers, which will now have a cost advantage over Detroit. How do you think that will play in Michigan in 2020?
The National Retail Federation called the tariffs a “tax on American families,” who will pay higher prices for canned goods and even beer in aluminum cans. Another name for this is the Trump voter tax.
The economic damage will quickly compound because other countries can and will retaliate against U.S. exports. Not steel, but against farm goods, Harley-Davidson motorcycles, Cummins engines, John Deere tractors, and much more.
Foreign countries are canny enough to know how to impose maximum political pain on Republican Senators and Congressmen in an election year by targeting exports from their states and districts. Has anyone at the White House political shop thought this through?
Then there’s the diplomatic damage, made worse by Mr. Trump’s use of Section 232 to claim a threat to national security. In the process Mr. Trump is declaring a unilateral exception to U.S. trade agreements that other countries won’t forget and will surely emulate.
The national security threat from foreign steel is preposterous because China supplies only 2.2% of U.S. imports and Russia 8.7%. But the tariffs will whack that menace to world peace known as Canada, which supplies 16%. South Korea, which Mr. Trump needs for his strategy against North Korea, supplies 10%, Brazil 13% and Mexico 9%.
Oh, and Canada buys more American steel than any other country, accounting for 50% of U.S. steel exports. Mr. Trump is punishing our most important trading partner in the middle of a Nafta renegotiation that he claims will result in a much better deal. Instead he is taking a machete to America’s trade credibility. Why should Canada believe a word he says?
https://www.wsj.com/articles/trumps-tariff-folly-1519950205
We know Trump loves the Coal tycoon, Bob Murray (in Trump’s first phone call to Bob as President, Trump said “I love you man”)…When one thinks about coal, they only think about power plants which are either closing or being converted to cheaper natural gas…Trump’s support for coal has not been well received publically, Trump knows supporting coal fired power plants is supporting a loser because more and more plants will continue to go offline if natural gas remains cheap regardless of how supports it…Trump has given coal some tiny handouts here and there yet Murray has been whining for a BIG handout ever since Trump became President…How else can Trump covertly support his coal buddy? Coal’s number two use, metal creation…In additional to using coal fired furnaces that turns iron ore into steel, the carbon used in steel comes from coal which often heated in a coal fired furnace…Including aluminum does throw America’s aluminum lobby a small bone, but more importantly, prevents United States companies to transition from steel to China aluminum in the event China decided to lower it’s aluminum costs to combat steel…
Perhaps we’ll see the rise of higher quality Chinese made Carbon Fiber/CFRP at rock bottom prices…
I have never seen the words “ higher quality Chinese made “ In the same sentence.
Making steel more expensive in the USA means driving the automobile industry out of the country.
Trump recently bragged about car assembly plants returning to the USA, citing the example of the shared Toyota/Mazda plant. Yes, it is only foreign companies like those two and VW, Mercedes and BMW who have invested in new plants. BMW is the largest exporter of automobiles from the USA; the BMW X3 is built only in the Spartanburg plant.
But when steel and aluminium become more expensive in USA than in all other countries because of Trump protectionism, moving car assembly to where steel is cheaper becomes the sensible option.
And now, tariffs on foreign cars? The world’s BMW X3s are reportedly made in Spartanburg, SC, for starters.
Probably a better solution to level the playing field than a blanket tariff –
Oh the other hand, higher tariffs on cars imported from Europe would hit the Buick Regal and Cascada, which are assembled in Opel factories in Germany and Poland.