Weekly News Review | 28 May 2018 | Automotive Purchasing and Supply Chain Automotive Purchasing and Supply Chain

Talking Point

Security issue or self-inflicted disaster?

US President Donald Trump’s latest automotive industry move, instructing the US Commerce Department to find out if the flow of light vehicles into America is weakening its economy and may impair national security, could backfire badly on the president. While tariffs that could spring from this action would likely force import-only US vehicle market sellers such as Mazda into raising its showroom prices thus alienating the very voters that Trump wants to woo, these taxes - for that is what they will be to most Americans - will also heavily impact GM and Ford’s foreign-built imports to the US. Added to this is the tremendous friction that will be caused to the US’s already slightly fractious relationships with Mexico, Canada, Japan and Germany.

Trump’s tub-thumping on the national security issue could be seen as another ploy to engender support from the US regions that have supported him, the so-called ‘Rust Belt’ states. As the auto manufacturing footprint in the US has shifted southwards so more reactionary and less sophisticated voters have become easy pickings for the president’s protectionist and jingoistic rhetoric and policies. Unfortunately, he may have misjudged this section of the electorate; while the UAW has welcomed the Trump administration's stance on trade as being better aligned with the union's than any other in recent years, he seems to have failed to notice that the UAW has almost no presence in the southern states - the workers there do not want union representation - and that the union publicly endorsed Hillary Clinton in 2016.

And from a simple economics point of view, it would appear that he has not really done his sums. Starting at the manufacturing and logistics end of the supply chain many thousands of employees, from truck and train drivers to vehicle preparation operators, are dependent on the employment generated handling imported vehicles. At the retail end, the US auto industry employs an estimated 200,000 people in more than 10,000 dealership sites. Of these, a significant proportion prepare and sell new and used import-only vehicles.

As for the national security issue, the case looks pretty flimsy. There is no shortage of US-made vehicles available to buyers, the industry is in better shape than it has been for nearly 10 years and the region has better relations with transplant nations than at any time in its history.

When Trump talked of swingeing tariffs on steel and aluminium, the global auto market reacted strongly. Now he is asking congress to effectively impose taxes on everyone in the supply chain, from logistics providers to dealership staff, and ultimately the vehicle purchasera. Branding imported vehicles a national security threat must be seen as a self-inflicted economic disaster for American consumers and the industry and does not deserve to be passed into law.

Simon Duval Smith

Simon Duval Smith

Simon Duval Smith

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