Sudden interruptions are anathema to automakers' production supply chain and the tariffs on steel and aluminum pose a tremendous risk to manufacturers in the short- and long-term, warned auto industry leaders who spoke before lawmakers recently.
As reported by Supply Chain Dive, on Sept. 26, several motor vehicle execs testified to members of the Senate Finance Committee, warning them that import tariffs could cause a tremendous amount of upheaval, even more so than they've created so far.
David Britt, vice chairman of the Spartanburg County Council in South Carolina and vice president of the South Carolina Tindall Corporation, stressed that regulatory strictures are already significant and adding tariffs to the mix could make for toxic brew. "The regulatory climate in 2018 is the worst it's ever been in the country's history," Britt stated, according to Supply Chain Dive.
Steel tariffs went into effect in March
In March, the White House implemented a 25 percent tariff on imported steel from countries like China, Mexico and Canada. The actions have since led to retaliatory taxes from China, in what's become a tit-for-tat trade war. With the average passenger car consisting primarily of iron and steel, automakers warn that the tariffs could bring about severe production disruptions due to commodity price increases.
North American Stamping Group President and CEO Michael Haughey spoke to this fact last month, telling the Senate Finance Committee that market prices on steel are up 50 percent since March when the import tariffs were installed. He attributed the price hikes to a combination of high taxes and steel producers artificially inflating prices.
"I've suspended growing our business," Haughey explained, Supply Chain Dive reported. A tier-two auto supplier, the company has since implemented a hiring freeze and modified its capital spending. Even sentiment among industry veterans is poor, comparing it to what it was like during the Great Recession and the auto bailout.
Britt corroborated Haughey's assertions, sharing in his company's supply chain frustrations caused by the growth in raw material costs.
"We just got a 10 percent increase, on top of the 23 percent increase we got back in March," Britt told the 27-member committee. "And we're warned now it's going to go up 15% more in January."
Processing the exclusion applications would require 178,000 hours."
Exclusion requests by the dozens
With the tariffs already installed and no indications as to when they'll be eased, several automaker executives have requested absolution, the report said. Their asks have gone unanswered, however. This is partially due to the high volume of exclusion requests, which a column in The Hill noted would require approximately 178,000 hours to process.
Meanwhile, 80 trade associations are speaking out against the import tariffs. Members of Americans For Free Trade, a group launched in September, are canvassing the country, urging citizens to support their cause.
"Tariffs are a tax on American families, period," said Sandy Kennedy president of the Retail Industry Leader Association. "This escalating trade war threatens to tax every aspect of our American lifestyle, from the clothes on our back and the food we eat to the cars we drive and shoes we wear."
Kennedy added that a weak supply chain adversely affects everyone in way or another.