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Source 1:
Tariffs will shut down North American auto production within a week. Auto exporting is a major economic engine for canada, bringing in about $51 billion in 2023. About 93 per cent of those exports go to the U.S., exposing a major piece of the economy to new 25 per cent tariffs that take effect at 12:01 a.m. ET on Feb.4.The tariffs may add thousands of dollars to the costs of American businesses trying to buy Canada‘s second-biggest export, the auto.
Source 2:
Multiple Tariffs on a Single Product? The North American automotive supply chain is so interwoven across all three USMCA countries that an engine, transmission, or other automotive component might be manufactured in one country, assembled in another, and then shipped back to the original country for processing, which is then finished back in Canada, which is then used to make a car component like a hood, which is then sent back to the US to get added to other components in a specific order.
Source 3:
Despite tariff threat, Mexico, Canada have been key to US car making.Canada and Mexico are integral to the North American supply chain and have relationships with auto manufacturers dating back to the early 1900s.Those ties remained strong throughout the 20th and 21st centuries. Tariffs could also substantially inflate the cost of manufacturing a new vehicle—by up to $6,250, according to S&P Global. Firms will have to decide which of those costs they can bear themselves and which they’ll pass on to consumers in the form of higher prices.
The tariff pause doesn’t mean the auto industry’s headache has ended. analysts say manufacturers are responding to the uncertainty around duties by buying ahead and by moving goods across the border while they’re still tariff-free.Companies on the other side of the border are reacting to an influx of orders by cramming and paying workers overtime, and fearing that doing work now will mean less to do in the future.
Getting those products to the US quickly is more expensive right now because manny companies are moving goods at once, says Paul Isley, a professor of economics at the Seidman College of Business at Grand Valley State University who forecasts business conditions in Western Michigan, were many auto suppliers and automakers are based. Then, storing that extra inventory incurs holding costs. In the US,local companies are also responding by holding off on hiring,Isley says.
These excerpts highlight the potential impacts of tariffs on the North American automotive industry, including increased costs, supply chain disruptions, and economic implications for Canada, Mexico, and the United States.
Interview with paul Isley: tariffs adn North american Automotive Industry
interviewer: How does the current high demand for rapid delivery of goods impacting the automotive industry affect the prices of transporting products to the U.S.?
Paul Isley:
Getting those products to the U.S. quickly is more expensive right now as many companies are moving goods at once. I am Paul Isley, a professor of economics at the Seidman College of Business at Grand Valley State University, where I forecast business conditions in Western Michigan—an area with many auto suppliers and automakers. Then, storing that extra inventory incurs holding costs. In the U.S.,local companies are also responding by holding off on hiring,I say.
Interviewer: Can you elaborate on how these holding costs impact the overall supply chain and economic outlook?
Paul Isley:
The increased holding costs lead to higher operating expenses forpanies,which can result in cost push inflation and reduced profitability. This downward ripple can make companies more cautious about future investments, including expansion and hiring. Thus, the economic activity in areas like Western Michigan could slow down, affecting regional growth prospects.
Interviewer: Have you seen evidence that companies are delaying hiring decisions due to these disruptions?
Paul Isley:
yes, many regional businesses are adopting a wait-and-see approach. With supply chain uncertainties and the elevated costs of operation, companies are reluctant to hire new staff until the conditions stabilize. This hesitancy in recruiting new workers can lead to labor shortages and further strain the supply chain, exacerbated by the automobile industry’s rapid production demands.
Interviewer: What are the broader implications for the North American automotive industry, especially regarding the economic implications for the U.S., Canada, and Mexico?
Paul Isley:
The broader implications are meaningful. The disturbances caused by tariffs can lead to supply chain inefficiencies and higher production costs, making the region less competitive globally. Such as, Canadian and Mexican suppliers may look for alternative markets, impacting trade volume and bilateral relationships. The U.S. may face higher consumer prices and potential job losses due to scaled-back production and delayed investments.
Conclusion:
Paul Isley highlights that tariffs lead to increased delivery costs, holding expenses, and supply chain disruptions. These factors affect hiring decisions and perhaps slow down economic activity across North America. The easing of these tariff-related pressures is vital for ensuring the”stability” and growth of the automotive industry and related economic implications for the U.S., Canada, and Mexico.
