Yahoo Finance Americans’ favorite brands say Trump’s tariffs are bad for business
The ongoing trade war is damaging some of Americans’ favorite brands, with General Motors (GM) warning Friday that tariffs could lead to a “smaller GM.”
In response to the Trump administration’s tariffs on steel and aluminum imports, Mexico, the EU and Canada have all imposed duties on U.S. products. Earlier this month, Mexico imposed tariffs on $3 billion worth of pork, apples and cheese. Last week, the EU raised taxes on $3.4 billion worth of U.S. imports, including classically “American” items like bourbon, blue jeans and motorcycles. Canada’s tariffs on $16.6 billion of U.S. products like ketchup, strawberry jam and toilet paper go into effect on July 1.
On Monday, iconic “made in America” Harley-Davidson (HOG) announced that it is moving some of its production abroad over the next 9 to 18 months — to countries like Brazil, India and Australia. In a regulatory filing, the company said its taxes have increased from 6% to 31% for bikes bound for Europe. This translates to an additional $2,200 per motorcycle. So that the cost is not passed onto the consumer, Harley Davidson will eat the additional cost, which the company estimates to be between $90 million and $100 million annually.
While Harley isn’t planning to raise prices for customers, other brands are passing some of the cost onto patrons. Brown-Forman (BF-A, BF-B) said European consumers should expect the price of a 700 ml bottle of Jack Daniel’s or Woodford Reserve whiskey to increase by 10% over the next few months.
Missouri-based Mid-Continent Nail Corporation, the largest nail manufacturer in the U.S., said it has laid off 12% of its workforce because of the tariff on steel imports from Mexico and Canada. Mid-Continent relies on imported Mexican steel to create nails in the U.S. The company, which has been around for over three decades, saw sales drop by 50% in two weeks after the imposed duty forced it to raise prices. A spokesman told CNN the company is “on the brink of extinction” unless the Commerce Department gives it an exemption.
Car companies may be hurt the most
On May 23, Commerce Secretary Wilbur Ross started an investigation of vehicle and auto part imports. Last Friday, Trump tweeted about imposing a 20% tariff on vehicles and auto parts imported from the EU. Shares of both domestic and European automakers, including General Motors, Ford (F), Volkswagen, Daimler, BMW, Ferrari, and Fiat Chrysler fell after Trump took to Twitter, even without the tariffs taking effect.
The deadline for automakers and suppliers to submit comments to the Commerce Department was originally set for June 22, but it was extended to June 29 — and a slew of automakers are rushing to submit their thoughts. The department received over 2,500 comments. In a statement to Yahoo Finance, Secretary Ross said, “The purpose of the comment period and of the public hearing scheduled for July 19th and 20th is to make sure that all stakeholders’ views are heard, both pro and con. That will enable us to make our best informed recommendation to the President.”
GENERAL MOTORS
General Motors said import tariffs “could lead to a smaller GM, a reduced presence at home and abroad for this iconic American company, and risk less — not more — U.S. jobs.” The Detroit-based automaker said the burden of the tariffs will eventually be felt by the customer and demand for new vehicles will soften.
Based on the Tariffs and Trade Barriers long placed on the U.S. & its great companies and workers by the European Union, if these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the U.S. Build them here!
— Donald J. Trump (@realDonaldTrump) June 23, 2018
TOYOTA
Though based in Japan, Toyota’s North America arm also submitted comments, arguing that companies beyond Detroit will feel the pain of these potential tariffs, specifically citing the Toyota Camry, one of the most popular cars sold in North America.
“Tariffs on imported parts will disrupt U.S.-based production of motor vehicles, since it will deprive our U.S. manufacturing plants of key parts and components. There is no vehicle in the United States, whether from Toyota, GM, Ford, FCA, Daimler or Hyundai, that is sole-sourced from exclusively U.S. parts and components.”
“The Camry is built in Kentucky, and has been the best-selling car in America for 19 of the last 20 years and one of the best American-made cars you can buy. But even the Camry has about 30% non-U.S. content. This means the Camry would see a cost increase of $1,800 (based on a price of $23,645). Ultimately, this cost will likely be passed along to consumers in the form of higher prices.”
VOLVO
According to its public comments, Swedish carmaker Volvo has 297 dealers across 48 states and employs 10,200 people in the U.S. Volvo’s US arm, based in Rockleigh, New Jersey, sold over 81,000 cars last year. The company makes its vehicles in Europe and China, but opened its first U.S. factory in South Carolina this month. The company wrote that “by increasing vehicle costs and triggering retaliatory measures, tariffs would depress vehicle exports from the U.S.”
KIA
South Korea’s Kia Motors said tariffs “would not only harm Kia Motors’ existing U.S. business operations and the American workers and communities the company supports, but also jeopardize the company’s plans for additional U.S. investments.” According to the company, it has invested $7.7 billion in the U.S. auto industry with facilities across Georgia, Michigan and California.
We will continue to update this list as more companies make public statements.
Melody Hahm is a senior writer at Yahoo Finance, covering entrepreneurship, technology and real estate. Follow her on Twitter @melodyhahm.
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