Automotive industry takes hit, as tariffs take effect

As tariffs went into effect for multiple nations on August 7, the automotive industry is reporting an almost $12 billion hit in financial losses due to tariffs. According to a Thursday analysis from the Wall Street Journal (WSJ), import duties on the automotive industry totaled $11.8 billion. 

Automotive manufacturers report the losses from previously instituted tariffs, including a 25% tariff on the automotive industry and a 50% tariff on steel and aluminum. The sector expects bigger financial losses as the August 7 tariffs are implemented. 

“This spring, the Trump administration imposed 25% tariffs on imported passenger vehicles, light trucks, and auto parts, sending shockwaves through the automobile industry,” Joseph Harris, fiscal policy analyst for the John Locke Foundation, told the Carolina Journal. “In the second quarter, operating earnings among 14 major automakers declined by a combined $12 billion.”

One of the state’s largest automotive companies, Toyota, reported a $3.06 billion hit in tariff duties, the most significant hit reported by an auto manufacturer.  According to an April report by WSJ, Toyota expects a $9.5 billion hit by the end of the fiscal year in March, resulting in a 44% decline in net profit. 

“Toyota has been part of the cultural fabric in the US for more than 65 years, and our philosophy has always been to build where we sell and buy where we build,” said Emily Holland, manager of corporate communications for Toyota North America, in a previous interview. “With over $50 billion invested in the US, including 10 US manufacturing plants and more than 49,000 direct jobs, we are fully compliant with the USMCA trade agreement and will continue to deepen our investments in America. Like the entire auto industry or any other global business, we will continue to adapt to trade policies to meet customer needs.”

This also follows reports from General Motors (GM) that the company absorbed $1.1 billion in tariff costs in the second fiscal quarter. Due to tariffs, GM estimated a $4-5 billion annual impact. A Wall Street Journal (WSJ) report said the tariff impact resulted in a 35% decrease in GM’s net income.  

GM manufactures vehicles for private and commercial use. GM Defense, a subsidiary of GM, also manufactures vehicles for the Department of Defense. GM Defense opened a production facility in Concord in 2021.

“The largest year-over-year loss was reported by the Japanese automaker Toyota, whose operating earnings dropped by $3 billion,” continued Harris. “The German automaker Volkswagen absorbed the second-largest hit, $1.5 billion. American companies GM and Ford experienced the third and fourth largest declines, each around $1 billion. So far, automakers have resisted raising prices, but if elevated trade costs persist, manufacturers will likely reconsider their pricing strategies in the near future.”

Tariffs could accelerate the completion of several long-delayed projects, including a potential Audi factory. Volkswagen, Audi’s parent company, has confirmed ongoing discussions with the White House regarding an investment package, according to WSJ. 

The WSJ report shows that Volkswagen incurred about $1.51 billion in losses and Ford $1 billion. Tesla received the least impact at $0.3 billion.

The US automotive industry faces substantial financial pressure due to escalating tariffs, billions in reported losses, and more are expected in the coming months.

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