United States: the cost of production of Tesla up, after increasing customs duties by 25 %

Donald Trump announced “a day of release”. After steel and aluminum, and pending construction wood or copper, US President Trump announced on Wednesday, 25 % additional customs duties on cars. These taxes will apply to “all the cars that are not made in the United States,” assured the American president from the White House, adding that they will come into force “April 2 and we will begin to collect them on 3,” he said.

“We are going to charge countries that do business in our country and take our wealth,” he justified. Clearly, “this is added to the already existing customs duties on these goods,” said one of his advisers. The so far applied rate was 2.5 %. This means that imported cars will now be taxed at 27.5 % of their value. And if new, the customs duties announced on Canadian or Mexican products, currently suspended, are applied, cars from these countries could be taxed at … 50 %.

A “considerable impact”

For world manufacturers, it is the cold shower. In Japan, whose automobile represents nearly a third of exports to the United States, Prime Minister Shigeru Ishiba said he considers retaliatory measures. His government, via his spokesperson, has warned of the “considerable impact” of the American customs offensive on Nippo-American economic relations, but also “on the global economy and the multilateral trading system”. And the Japanese and South Korean giants of the sector like Toyota and Hyundai saw their shares tumble this Thursday on the stock market.

However, the manufacturers have already taken the lead: Toyota recently announced the start of production from April from its 11th factory in the United States: out of the 2.33 million vehicles it sold last year in the United States (23 % of its world sales), only 1.27 million were produced there. For its part, the South Korean automotive giant Hyundai announced on Monday having intended to invest in the United States $ 21 billion over the next four years.

The cost of production of Tesla upwards

But this increase in rights will also put American manufacturers in difficulty like Tesla. Today, half of the vehicles sold in the United States are made abroad. American manufacturers have factories abroad that feed the American market, mainly in Canada and Mexico. Ford thus imports 20 % of the vehicles it sells in the country and General Motors around 750,000 per year, mainly of the two neighboring countries.

Donald Trump, however, has planned that vehicles assembled in Mexico or Canada will be applied to 25 % tax only on the share of the parts they contain from the United States. Of the thousands of parts that make up a vehicle, the controllers will have to determine whether a plastic bolt or part have been produced in the United States or China.

In addition, almost half of the steel and aluminum consumed by the American industries is indeed imported. Same thing for engines, where only 19 % of cars sold in the United States are made in the country.

A response from producing countries

These taxes imposed by Trump on the entire automotive planet will probably not remain a dead letter. On a trip to Tokyo, Brazilian President Lula said that his country “could not stay without doing anything,” faced the customs offensive committed by US President Donald Trump and now extended to the automotive sector.

“We cannot stay without doing anything, convincing ourselves that the United States is only the right and that they are the only ones to be able to tax the products of others. We will adopt the approach which, in our view, will be beneficial for Brazil, “he said. “We have two options: one is to resort to the World Trade Organization, which we are going to do, and the other is to surcharge the American products that we import-that is to say putting the law of reciprocity into practice,” he added.