Tariffs may wind up hurting Trump voters most of all, warn automakers

In a move President Donald Trump says is meant to fulfill a campaign promise and increase American jobs, foreign steel and aluminum producers will soon face hefty new tariffs — but some fear the move could quickly backfire and hurt precisely those who supported candidate Trump, especially workers in the U.S. auto industry.

With exceptions temporarily carved out for Canada and Mexico, steel imports will now face 25 percent tariffs, while aluminum will be subject to new 10 percent duties. Earlier in the week, Commerce Secretary Wilbur Ross tried to downplay the impact. But, considering the amount of steel and aluminum in a typical vehicle, prices for cars could go up by hundreds of dollars, analysts warn.

“This could backfire tremendously,” warned automotive analyst David Sullivan of AutoPacific, especially at a time when the auto industry is already showing signs of weakening sales that could result in lower profits and more job cuts.

Sullivan called the president’s tariffs plan “a very tone deaf move that could negatively impact a lot of workers,” many of which voted for Trump in 2016 in critical swing states like Michigan and Pennsylvania, as well as more solid Republican states such as South Carolina and Alabama that have become major automotive manufacturing centers.

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Impact of Trump's proposed steel and aluminum tariffs
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Impact of Trump's proposed steel and aluminum tariffs
NEW YORK, NY - MARCH 1: A trader is comforted by a coworker as they work on the floor of the New York Stock Exchange (NYSE) on March 1, 2018 in New York City. Major stock indexes plunged Thursday afternoon following President Trump's announcement that he was imposing a 25 percent tariff on imported steel and 10 percent on aluminum. Investor concern about the news rattled the Dow Jones industrial average, which closed down more than 400 points. (Photo by Eduardo Munoz Alvarez/Getty Images)
SAN FRANCISCO, CA - MARCH 02: Wine in aluminum cans is displayed on a shelf at Ales Unlimited on March 2, 2018 in San Francisco, California. Beverage companies that use aluminum for canned drinks are concerned that tariffs proposed by US President Donald Trump could result in higher prices for consumers and job cuts across the industry. (Photo by Justin Sullivan/Getty Images)
U.S. President Donald Trump announces that the United States will impose tariffs of 25 percent on steel imports and 10 percent on imported aluminum during a meeting at the White House in Washington, U.S., March 1, 2018. REUTERS/Kevin Lamarque
Members of trade unions hold a protest against US President Donal Trump's import surcharge on Brazilian steel and in defense of their employment, outside the US Consulate in Sao Paulo, Brazil, on March 5, 2018. Since announcing last week plans to impose a 25 percent tariff on steel imports and 10 percent on aluminium, Trump has shrugged off threats from many nations, including China, Canada, Brazil and Mexico among others. / AFP PHOTO / Miguel SCHINCARIOL (Photo credit should read MIGUEL SCHINCARIOL/AFP/Getty Images)
SAN FRANCISCO, CA - MARCH 02: Beer in aluminum cans is displayed on a shelf at Ales Unlimited on March 2, 2018 in San Francisco, California. Beverage companies that use aluminum for canned drinks are concerned that tariffs proposed by US President Donald Trump could result in higher prices for consumers and job cuts across the industry. (Photo by Justin Sullivan/Getty Images)
White House Chief of Staff John Kelly and press secretary Sarah Sanders listen as U.S. President Donald Trump announces that the United States will impose tariffs of 25 percent on steel imports and 10 percent on imported aluminum during a meeting at the White House in Washington, U.S., March 1, 2018. REUTERS/Kevin Lamarque
NEW YORK, NY - MARCH 1: Traders work on the floor of the New York Stock Exchange (NYSE) on March 1, 2018 in New York City. Major stock indexes plunged Thursday afternoon following President Trump's announcement that he was imposing a 25 percent tariff on imported steel and 10 percent on aluminum. Investor concern about the news rattled the Dow Jones industrial average, which closed down more than 400 points. (Photo by Eduardo Munoz Alvarez/Getty Images)
Members of trade unions hold a protest against US President Donal Trump's import surcharge on Brazilian steel and in defense of their employment, outside the US Consulate in Sao Paulo, Brazil, on March 5, 2018. Since announcing last week plans to impose a 25 percent tariff on steel imports and 10 percent on aluminium, Trump has shrugged off threats from many nations, including China, Canada, Brazil and Mexico among others. / AFP PHOTO / Miguel SCHINCARIOL (Photo credit should read MIGUEL SCHINCARIOL/AFP/Getty Images)
Chairman, CEO and president of Nucor John Ferriola and U.S. Steel CEO Dave Burritt flank U.S. President Donald Trump as he announces that the United States will impose tariffs of 25 percent on steel imports and 10 percent on imported aluminum during a meeting at the White House in Washington, U.S., March 1, 2018. REUTERS/Kevin Lamarque
NEW YORK, NY - MARCH 1: A trader works on the floor of the New York Stock Exchange (NYSE) on March 1, 2018 in New York City. Major stock indexes plunged Thursday afternoon following President Trump's announcement that he was imposing a 25 percent tariff on imported steel and 10 percent on aluminum. Investor concern about the news rattled the Dow Jones industrial average, which closed down more than 400 points. (Photo by Eduardo Munoz Alvarez/Getty Images)
SAN FRANCISCO, CA - MARCH 02: Wine in aluminum cans is displayed on a shelf at Ales Unlimited on March 2, 2018 in San Francisco, California. Beverage companies that use aluminum for canned drinks are concerned that tariffs proposed by US President Donald Trump could result in higher prices for consumers and job cuts across the industry. (Photo by Justin Sullivan/Getty Images)
NEW YORK, NY - MARCH 1: Traders work on the floor of the New York Stock Exchange (NYSE) on March 1, 2018 in New York City. Major stock indexes plunged Thursday afternoon following President Trump's announcement that he was imposing a 25 percent tariff on imported steel and 10 percent on aluminum. Investor concern about the news rattled the Dow Jones industrial average, which closed down more than 400 points. (Photo by Eduardo Munoz Alvarez/Getty Images)
Pacific Coast Producers president and CEO Dan Vincent stands in his cooperative's distribution center in Lodi, California, U.S., April 27, 2018. Picture taken April 27, 2018. To match Insight USA-TRUMP/TARIFFS-CANS REUTERS/Noah Berger
An employee uses a crane as he prepares to move a steel pipe at the SAW Pipe Mills, operated by Liberty Commodities Ltd., in Hartlepool, U.K., on Thursday, June 14, 2018. Steel and aluminum�tariffs�imposed by the U.S. in March may already be filtering through to prices charged by American producers of the metals. Photographer: Chris Ratcliffe/Bloomberg via Getty Images
An employee passes a stack of steel pipes at the SAW Pipe Mills, operated by Liberty Commodities Ltd., in Hartlepool, U.K., on Thursday, June 14, 2018. Steel and aluminum�tariffs�imposed by the U.S. in March may already be filtering through to prices charged by American producers of the metals. Photographer: Chris Ratcliffe/Bloomberg via Getty Images
A steel pipe enters a cleaning machine at the SAW Pipe Mills, operated by Liberty Commodities Ltd., in Hartlepool, U.K., on Thursday, June 14, 2018. Steel and aluminum�tariffs�imposed by the U.S. in March may already be filtering through to prices charged by American producers of the metals. Photographer: Chris Ratcliffe/Bloomberg via Getty Images
Identification stencils hang above steel pipes at the SAW Pipe Mills, operated by Liberty Commodities Ltd., in Hartlepool, U.K., on Thursday, June 14, 2018. Steel and aluminum�tariffs�imposed by the U.S. in March may already be filtering through to prices charged by American producers of the metals. Photographer: Chris Ratcliffe/Bloomberg via Getty Images
Sheet steel sits stacked in the store room at the SAW Pipe Mills, operated by Liberty Commodities Ltd., in Hartlepool, U.K., on Thursday, June 14, 2018. Steel and aluminum�tariffs�imposed by the U.S. in March may already be filtering through to prices charged by American producers of the metals. Photographer: Chris Ratcliffe/Bloomberg via Getty Images
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The exact impact of the new tariffs on the auto industry is unclear, in part because there are so many different sources of parts and components that go into the typical vehicle. Manufacturers and their suppliers are trying to figure the precise cost, said Joe Phillippi, head of AutoTrends Consulting, but he estimates it will be $200 to $300 a car. Some have put the figure significantly higher, and the number could vary widely by manufacturer.

Related: Trump's new tax plan might just make your new car more expensive

Automakers and auto trade groups that have generally stood behind the president, or at least remained relatively quiet about prior issues of concern, were more open in criticizing the tariff plans.

The move “could result in an increase in domestic commodity prices — harming the competitiveness of American manufacturers,” said Ford before Trump made the tariffs official on Thursday.

The Motor & Equipment Manufacturers Association, a trade group representing industry parts and components suppliers, warned that many of the 800,000 U.S. jobs its members create could be at risk.

"Tariffs are taxes, and the American taxpayer will pay the cost of a trade war," said Cody Lusk, President and CEO of the American International Automobile Dealers Association, which represents import retailers for companies like Toyota and Volkswagen who employ over 500,000 dealer staff. "Even with limited exemptions, tariffs will raise the sale prices of new vehicles, turning off price-sensitive consumers and leading to a dip in both auto sales and auto-related jobs."

The U.S. auto industry took a slight tumble during Trump’s first year in office after rebounding from the worst downturn since the Great Depression to set a series of all-time records under President Barack Obama. Before his successor raised the threat of tariffs, manufacturers already were preparing for another modest decline in 2018. They’ve been trying to rein in prices that have surged sharply in recent years, pushing lower-cost leases and increasing rebates and other incentives to levels not seen since the “Great Recession” that began the decade.

But analysts like Sullivan and Phillippi warn that manufacturers have to be cautious in how far they take those givebacks to avoid repeating the moves that nearly crushed the auto industry a decade ago, leading to the bankruptcies of Chrysler and General Motors — moves that ultimately cost taxpayers tens of billions of dollars to rescue.

Over the past year, manufacturers, especially those based in Detroit, have had to cut production a number of times, idling thousands of workers — though some of the moves were temporary, and meant to switch over plants from slow-selling sedans to hot new SUVs.

Any slowdown in sales, industry leaders warn, could bring on further, and longer-term, cuts — ironically, among the same autoworkers who voted heavily for candidate Trump in November 2016.

Another irony is that by raising vehicle prices new tariffs could actually worsen the U.S. trade deficit by making American auto exports more costly.

In recent years, automotive exports have actually been on the rise, with foreign brands leading the charge. About 237,000 of 371,000 vehicles BMW produced at its Spartanburg, South Carolina plant last year were shipped abroad, making it the nation’s largest auto exporter. Honda and Mercedes-Benz have been expanding their auto exports from Southern plants, and Volvo has expected to use its soon-to-open S.C. plant as an export base.

Those plants, in deep red states, have added thousands of jobs that might now also be at risk.

One industry leader who appeared to back the tariffs was Tesla CEO Elon Musk. "I am against import duties in general, but the current rules make things very difficult" he tweeted Thursday. "It's like competing in an Olympic race wearing lead shoes.”

If anything, wrote Musk, the president should take even tougher actions against China — which itself has unfair trade rules for foreign manufacturers trying to operate in its market, noted Musk.

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