U.S. President Donald Trump said on Tuesday he intends to impose auto tariffs “in the neighborhood of 25 per cent” and similar duties on semiconductors and pharmaceutical imports, the latest in a series of measures threatening to upend international trade.
On Friday, Trump said levies on automobiles would come as soon as April 2, the day after members of his cabinet are due to deliver reports to him outlining options for a range of import duties as he seeks to reshape global trade.
Trump told reporters on Tuesday that sectoral tariffs on pharmaceuticals and semiconductor chips would also start at “25 per cent or higher, and it will go very substantially higher over the course of a year.”
Cars and car parts are largely produced in Mexico or Canada. The supply chain is heavily integrated across both borders, with parts being sent back and forth for production and assembly. A 25% tariff would increase the cost of cars drastically. It would take a long time before local plants could be planned and built. Consumers would take a huge hit.
They are being manufactured in friendly countries. Canada and Mexico are both friendly countries. Trump and his policies are making enemies of them very quickly. Soon the US won’t have any friends left.
Yeah, I’m not saying that it wouldn’t have an impact, but rather that I don’t think that the rationale is internalizing an externality – it’s being done for political reasons.