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Toyota Says Trump's Tariffs to 'Adversely Impact' Automakers

Toyota does not love what President Trump is doing for it, as his steel and aluminum tariffs could raise costs for an already slumping auto industry.

The auto industry is warning that U.S. sales declines, which have become routine over the past year, may continue thanks to the tariffs President Donald Trump plans to slap on steel and aluminum imports.

Toyota Motor Corp., which plans to build a new $1.6 billion factory in Alabama with Mazda Motor Corp., said the administration’s decision will “adversely impact” auto companies by raising costs and prices of cars and trucks sold in the U.S. More than 90% of the steel Asia’s biggest carmaker needs in the U.S. is from the country, it said in a statement.

Trade groups representing automakers including General Motors Co. and Toyota, plus parts suppliers like Robert Bosch GmbH, tried to warn the Trump administration of unintended consequences before the president said Thursday he plans to order tariffs of 25% on imported steel and 10% on aluminum. Asian automakers’ shares declined while U.S. carmakers -- already slipping because of weak February sales -- extended their drop after Trump’s comments.

“These proposed tariffs on steel and aluminum imports couldn’t come at a worse time,” said Cody Lusk, president of the American International Automobile Dealers Association. “Auto sales have flattened in recent months, and manufacturers are not prepared to absorb a sharp increase in the cost to build cars and trucks in America.”

Honda Motor Co., which declined to comment on the administration’s move, led the drop in shares of Asian carmakers. Following is a table showing how much the shares declined Friday.

Toyota -2.6%
Honda -3.5%
Nissan -1.5%
Hyundai -4%
Subaru -2.5%
Mazda -2.5%


Five of the six biggest car manufacturers on Thursday posted lower February U.S. deliveries than a year ago. GM shares slumped 4% in New York, while Ford Motor Co. dropped 3% and Fiat Chrysler fell 2.8%.

The average car includes about $830 of steel and $400 of aluminum, according to a Feb. 26 analysis by Colin Langan, an analyst with UBS.

He projected that Ford’s raw material costs were already going to rise by $1 billion this year, and said Thursday that the tariffs would add another $300 million. GM’s raw material costs, already seen climbing $800 million, would rise an additional $200 million from the import measures. Langan characterized rising raw material costs as “manageable.”

Charlie Chesbrough, senior economist for researcher Cox Automotive, estimates the tariffs Trump proposed would add about $200 to the total price of a vehicle.

“It’s unfortunate because it comes at a time when there are already fears about inflation,” he said in an interview. “This is only going to add fuel to that fire.”

While the Trump administration did the auto industry a favor by cutting taxes late last year, the tariffs have the potential to “nullify many of the benefits” by boosting vehicle prices, said John Bozzella, president of the Association of Global Automakers. The group represents companies including Japan’s Toyota, Germany’s Bosch and South Korea’s Hyundai Motor Co.

“Investments earmarked for new products and plants will instead be funneled to pay for rising steel and aluminum prices used in existing products and facilities,” Bozzella said in a statement released Wednesday.

Global Automakers said that President George W. Bush’s 2002 steel tariffs cost the economy 200,000 jobs, including 30,000 in Michigan, Ohio and Pennsylvania.

Even without the new tariffs, rising metal prices have been a problem for Ford. The second-largest U.S. automaker said in January that 2018 would be a “ bad year” as costs surge. The price of steel, Ford’s biggest commodity purchase, has jumped about 33% since the start of last year. Aluminum, used for the bodies of F-Series pickups, is up more than a quarter.

“Certainly, this is going to be a negative for the vehicle market,” Chesbrough said. “At some point, it’s going to put vehicles just out of reach for some buyers and it’s going to cause some kind of pullback in the market.”

by Jamie Butters and Keith Naughton

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