One of Trump’s battles is fought in the automotive industry

The commercial war that Donald Trump prepares has one of its axes in the automotive industry. China and the United States occupy the first and second places as vehicle producers and these positions are repeated as the largest car markets worldwide, according to data from the International Organization of Automobile Constructors (OICA).

China is the largest vehicle market in the world, but it is also the main producer with a machinery that triples that of the United States, and that beyond feeding its enormous demand, it is gaining land in Asia, Europe, Latin America and Mexico, its commercial partner in the automotive value chain.

Last year, Chinese car sales in the United States represented only 0.35 percent of a market in which Toyota, General Motors and Ford – the first Japanese and the other two Americans – concentrate almost half of sales.

However, in other markets Chinese brands are taking impulse. According to a comparison to the first half of last year made by the NYVUS platform, Chinese automotive concentrated 29.4 percent of sales in Chile; 8.3 percent in Mexico and 6.9 percent in Brazil.

The United States is the second largest car producer globally, but it is also a large international market. At this point, the Trump administration has threatened with 25 percent tariffs on the importation of vehicles (which includes its commercial partners, Mexico and Canada), with the possibility of new increases during the year.

Standard & Poors warns that for European car manufacturers, this increase in tariff rates would exacerbate existing pressures, while Japanese and Korean industries would be the main beneficiaries, in addition that the use of quotas To drastically increase the export opportunities of the United States can be relatively limited.

Although President Trump did not atina to explain what benefit he has for his industry to impose tariffs on the importation of armed vehicles in the territory of his alleged commercial allies (Mexico and Canada), the industry has emphasized the internal risk.

In the long term, a 25 percent tariff at the borders of Mexico and Canada would open a hole in the US industry that we have never seenwarned Jim Farley, the executive director of Ford Motor.

Gabriel Padilla, director of the National Autopartes Industry (INA), said the tariff would have to be assumed by the final consumer and would imply an average increase of 3 thousand dollars in the price of new cars for buyers in the United States. This without counting the quotas to aluminum and steel.

Standard & Poor’s (S&P) explained that among Trump’s different statements, tariffs could decelerate world economic growth and damage relations in the supply chain between the United States and other countries. Manufacturers of all industries will be affected by higher acquisition costs of intermediate goods, while tariffs on imported assembly will boost inflation.

There are three scenarios in terms of tariffs, considers the risk rating. One is universal rates. In this case of 10 percent as a standard import tariff for all countries, except those of the T-MEC, global sales in the automotive sector are expected to be reduced in around one million units per year for 2025, 2026 and 2027.

In case of reciprocal tariffs, S&P trials that the United States could apply the common external tariff of the European Union of 10 percent instead of using the current US tariff of 2.5 percent for passenger vehicles and, since Japan does not apply tariffs to imports of US vehicles, this country and southern Korea could be exempt, which would make the exporters of Europe and the rest of Europe They would lose.

Finally, if measures are applied regarding VAT reciprocity, both Mexico and Canada impose this separate tax, although there is still the possibility of a limited tariff for each of those countries under this approach. Vehicles imported from continental China, excluding battery vehicles (VEB), would be especially affected.