The enormous consequences Trump's tariffs could have

Summary

Consider This from NPR: The Enormous Consequences Trump's Tariffs Could Have

Release Date: December 8, 2024

In this episode of NPR's Consider This, host Scott Detrow delves into the potential ramifications of President-elect Donald Trump's proposed 25% tariffs on imports from Mexico and Canada. The discussion navigates through the intricacies of international trade agreements, the fragile supply chains of the auto industry, and the broader economic implications for American workers and consumers.

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1. Introduction and Context

Scott Detrow opens the episode by referencing the 2022 protest by Canadian truckers against COVID-19 vaccine mandates. This blockade of the Ambassador Bridge between Windsor and Detroit, a critical artery for U.S.-Canada trade, serves as a real-life experiment in international trade disruptions. The protest resulted in significant economic losses, particularly for the auto industry, highlighting the dependency on cross-border trade.

Scott Detrow [00:00]: "Here's the police chief, Peter Slowly at the time... The blockade ultimately cost autoworkers and car companies some $300 million by one estimate."

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2. Trump's Tariff Announcement

Detrow transitions to the current political climate, focusing on President-elect Donald Trump's pledge to impose a 25% tariff on all imported goods from Mexico and Canada. This move is positioned as a direct challenge to existing trade agreements and is met with serious concern by Canadian Prime Minister Justin Trudeau.

Scott Detrow [01:06]: "Now that President-elect Donald Trump has said he will impose a 25% tariff on all imported goods for Mexico and Canada."

Detrow underscores the gravity of Trump's statements, emphasizing that, based on past behavior, Trump is likely to follow through on his promises.

Scott Detrow [01:18]: "One of the things that is really important to understand is that Donald Trump, when he makes statements like that, he plans on carrying them out."

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3. Impact on the Auto Industry

Camila Domonoski, NPR's auto industry correspondent, provides a detailed analysis of how the proposed tariffs would affect the automotive sector. She explains that the increase in costs would exacerbate existing concerns about vehicle affordability, with the average new car already priced near $49,000.

Camila Domonoski [05:10]: "It's an increase in costs and that's coming at a time when affordability for vehicles is a major concern for the auto industry."

Domonoski highlights the complexity of the auto supply chain, which relies heavily on seamless cross-border movement of parts between the U.S., Canada, and Mexico. She uses the example of wire harnesses—the "nervous system of a car"—to illustrate how tariffs could disrupt production.

Camila Domonoski [06:08]: "It's a lot of labor. And what happens right now is you might have a wire or clips for those wires made in the US shipped to Mexico... before then they also go into the final car."

The potential for retaliatory tariffs from Canada and Mexico could lead to a cascading increase in costs across the entire supply chain, impacting all car manufacturers regardless of their plant locations.

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4. Labor Perspective

Andrea Hsu, covering labor issues, brings in insights from Jeff Wakefield, a truck driver affected by the 2022 blockade, and Romaine McKinney, president of UAW Local 869. The discussion reveals a divided stance among workers regarding Trump's tariffs.

Jeff Wakefield [07:09]: "Specifically higher tariffs on cars coming from Mexico and Canada that don't meet the strict requirements... It's all about protecting jobs."

McKinney emphasizes that while a 25% tariff could initially hurt production by increasing costs and slowing orders, some workers believe that such measures might ultimately secure jobs by encouraging domestic manufacturing.

Romaine McKinney [08:08]: "Autoworkers are middle-class Americans who are price-conscious consumers."

However, Hsu points out that the broader economic impact would extend beyond the auto industry, potentially increasing the cost of various consumer goods and everyday necessities.

Andrea Hsu [08:47]: "A 25% tariff will expeditiously run up the cost of operating your home. That is the bigger problem for us."

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5. Feasibility and Likelihood of the Tariff

The episode addresses the uncertainty surrounding the implementation of the proposed tariffs. While Trump has reiterated his commitment, experts like Camila Domonoski and Paul Jacobson of General Motors express cautious optimism that these tariffs may serve more as bargaining chips rather than permanent measures.

Camila Domonoski [10:39]: "The president-elect has talked about it... the goal is not to have this tariff in place."

Jacobson remarks on the long-term planning of car companies, which typically operate on multi-year horizons, suggesting that any immediate tariff threats may not drastically alter their strategies in the short term.

Paul Jacobson [11:03]: "We're trying to not overreact... I'm not going to overreact to a tariff if I don't know that it's not going to be traded away in 90 days for something else."

Nonetheless, the possibility of Trump imposing additional tariffs beyond the initial proposal keeps the industry on edge, as companies prepare for various scenarios.

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6. Conclusion

The episode wraps up by reiterating the significant potential impacts of Trump's proposed tariffs on the auto industry, labor markets, and the broader economy. While there is skepticism about the immediate implementation of such a sweeping tax, the discussions highlight the fragile nature of international trade relationships and the extensive interconnectedness of modern supply chains.

Scott Detrow [11:37]: "Thanks to both of you... It's Consider This from NPR."

Through expert interviews and real-world examples, NPR's Consider This provides listeners with a comprehensive understanding of the stakes involved in Trump's tariff proposal, emphasizing its far-reaching consequences for industries and consumers alike.

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Notable Quotes:

• Peter Slowly [00:24]: "This is a siege. It is something that is different in our democracy than I've ever experienced in my life."
• Jeff Wakefield [07:09]: "It's all about protecting jobs."
• Andrea Hsu [08:47]: "A 25% tariff will expeditiously run up the cost of operating your home."
• Camila Domonoski [09:00]: "In the auto industry, there is a big, unusual kind of odd tariff, specifically on pickup trucks called the chicken tax."

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Attribution:

• Hosts and Contributors: Scott Detrow, Camila Domonoski, Andrea Hsu
• Interviewees: Jeff Wakefield, Peter Slowly, Romaine McKinney, Paul Jacobson
• Production Team: Connor Donovan (Producer), Courtney Dorning, Emily Cobb, Cara Platoni (Editors), Sami Yenigun (Executive Producer)

For more insights and detailed discussions, listeners are encouraged to subscribe to Consider This and explore additional resources at plus.npr.org/considerthis.

Transcript

[Scott Detrow]

Back in 2022, some angry truckers in Canada unintentionally ran a real life experiment in international trade. This was that big convoy protesting Canada's COVID 19 vaccine mandate, requiring truckers to be vaccinated to pass freely across the US Border. They drove the rigs into Ottawa, the Canadian capital, and basically shut it down. Here's the police chief, Peter slowly at the time.

[Camila Domonoski]

This is a siege. It is something that is different in our democracy than I've ever experienced in my life.

[Scott Detrow]

The protest, though, wasn't just in Ottawa. The truckers also blockaded the Ambassador Bridge between Windsor and Detroit. A quarter of all trade between Canada and the US Goes over that bridge. Truck driver Jeff Wakefield was stranded on the US Side of the border during the blockade. He said the jam also rippled out to another nearby border crossing.

[Andrea Hsu]

I got a friend down there. Four hours, he's moved a half a mile now. The blockade is supposedly down there blocking that off. So Sarnia closed disclosed. Where do you go? The other option is you want to run 700 miles out of route and go to Buffalo, cross and come all the way back to Windsor. That's the only other option.

[Scott Detrow]

This was a huge disruption to cross border trade. And some of the businesses hit most immediately were car companies with parts not able to get to the plants that needed them. Factories on both sides of the border cut entire production shifts and slowed their operations. The blockade, which only lasted one week, ultimately cost autoworkers and car companies some $300 million by one estimate. It was a demonstration of just how dependent the industry is on trade across the U.S. canada border. And this is particularly relevant right now, now that President elect Donald Trump has said he will impose a 25% tariff on all imported goods for Mexico and Canada. It's a threat that Canadian Prime Minister Justin Trudeau takes at face value. One of the things that is really important to understand is that Donald Trump, when he makes statements like that, he plans on carrying them out. Consider this Trump's tariffs could have huge consequences for the people who make cars and the people who buy them. And even if he's bluffing, Trump has other big plans to shake up the auto industry. From NPR, I'm Scott Detrow.

[Andrea Hsu]

Support comes from our 2024 lead sponsor of Consider this Anthropic. Meet Claude, the AI assistant from Anthropic. When you upload company documents into Claude, you're giving it the context to become your subject matter expert and deliver astute and helpful responses. Claude helps engineers ship products faster, marketers craft compelling campaigns and sales teams Personal enterprise outreach at scale. Empower every person in your organization with AI that's both powerful and protected. Discover Enterprise grade [e-mail] Enterprise this message.

[Peter Slowly]

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[Scott Detrow]

It's consider this from NPR. You never know if President elect Donald Trump is bluffing, but when you have billions of dollars on the line, you have to take him seriously. So car companies took notice when Trump announced a plan for huge new tariffs in a social media post just before Thanksgiving. A 25% tax on imports from Canada and Mexico would have a major impact on the car industry, which depends heavily on cross border trade. NPR's Camila Domonoski who covers the auto industry and Andrea Hsu, who covers labor, have been talking to car companies and workers about the plan and join me now. Hey there.

[Camila Domonoski]

Hi.

[Jeff Wakefield]

Hey Scott.

[Scott Detrow]

So, Andrea, I'm going to start with you getting back to this question which we asked so many times for a four year span. Can Trump do this? Because specifically, doesn't the US Have a free trade agreement with Mexico and Canada?

[Jeff Wakefield]

Yeah, yeah. It's called USMCA. Trump himself signed it into law in 2020. It replaced NAFTA. And under this agreement, goods flow across the borders duty free as long as they meet certain requirements. So when it comes to cars, those requirements have to do with how much of the vehicle was produced in North America and the wages PA paid to people building those cars. But there's no outside party like a court that can force a country into compliance. So if Trump issues an executive order imposing a 25% tariff, as he has threatened to do, we would just expect Canada and Mexico to retaliate with tariffs of their own. But I do want to reiterate here. We just don't know if he's actually going to follow through with this.

[Scott Detrow]

Right. Camila, I want to get to the car company's perspective on this. What would a 25% tariff on imports from Canada and Mexico mean for the car industry?

[Camila Domonoski]

Well, look, it's an increase in costs and that's coming at a time when affordability for vehicles is a major concern for the auto industry. The average new vehicle right now costs almost $49,000, which is wild. It's. It's a tremendous amount of money. If you look at how these tariffs would affect prices, one way is on finished vehicles. So that's your Toyota Tacomas that come from Mexico, Chrysler Pacificas that are made in. They would get more expensive as the tariff is applied to them. But the other element here, which is much bigger than that is parts. The kind that cross that bridge between Canada and the US and also cross between the US And Mexico all the time. We have built an entire supply chain around these three countries working together to build vehicles.

[Scott Detrow]

Can you give me an example to help us understand that supply chain and how important and I guess fragile it is when it comes to all of this?

[Peter Slowly]

Yeah.

[Camila Domonoski]

I'll take one example which is talking about wire harnesses.

[Scott Detrow]

All right.

[Camila Domonoski]

So this is like the nervous system of a car. The wires that connect all the different electronic bits and bobs. And you don't want a giant spaghetti pile of wires at the bottom of a car like I have on top of my desk right now. So they connect these wires into bundles very precisely and neatly.

[Jeff Wakefield]

Right.

[Camila Domonoski]

It's a lot of labor. And what happens right now is you might have a wire or clips for those wires made in the US Shipped to Mexico to then be tied into these precise bundles and then shipped back into the US to go into say a seat or another componen before then they also go into the final car. Lots of parts of cars get built up like this in a series of steps that happen on different sides of these borders. So when you have concerns about tariffs and then retaliatory tariffs, the costs could really build. And this affects all car companies, not just ones that have plants in Mexico or Canada.

[Scott Detrow]

Given all of this though, Andrea, you know the UAW has actually pushed for higher tariffs on cars in the past. Right. Like help us make sense of all of this.

[Jeff Wakefield]

Yeah. Specifically higher tariffs on cars coming from Mexico and Canada that don't meet the strict requirements for North American made parts and higher wages that I talked about? And this is all about protecting jobs. So let's say you have a car plant in Mexico that's making cars for the US market, but the engines or the transmissions are not made in North America. Those cars can't come into the US Duty free. The penalty is a two and a half percent tariff. But the union is saying that's too low to be a deterrent. It might be cheaper for those carmakers to pay that tariff than it would be to source everything in North America. So the union would like tariffs that are High enough to compel companies to make, you know, cars, make parts, ideally in the U.S. but, you know, raising that two and a half percent tariff is very different from imposing a blanket 25% tariff on everything that's coming from Mexico and Canada.

[Scott Detrow]

Any sense from the conversations you've had how workers think they'll be affected by all of this?

[Jeff Wakefield]

Well, I Talked with Romaine McKinney. He's president of UAW Local 869 outside Detroit. His members work at war and stamping. They stamp all kinds of metal parts that are sent to plants in the US but also to Mexico and Canada. And so they would feel the impacts of a trade war immediately. Maybe they'd have to slow production if orders slowed. But beyond that, McKinney stressed it's not just about cars or car parts. A 25% tariff, he says, would run up the prices of all kinds of consumer goods, whether that's fruit and vegetables or nuts and bolts.

[Andrea Hsu]

A 25% tariff will expeditiously run up the cost of operating your home. That is the bigger problem for us.

[Jeff Wakefield]

You know, he says autoworkers are middle class Americans who are price conscious consumers.

[Scott Detrow]

Okay, Camille, what about the other argument, though, the one in favor of tariffs? You make it more expensive to import things, more things are built in the U.S. yeah.

[Camila Domonoski]

And, you know, in the auto industry, there is a big, unusual kind of odd tariff, specifically on pickup trucks called the chicken tax. And after that tariff was put in place a very long time ago, a bunch of pickup manufacturing did move from overseas to North America. One caveat is the number of jobs involved is not always what people would hope for. When a company moves production from a country where cost of labor is cheap to one where wages are really high, they are often very motivated to see how much they can do by robots.

[Jeff Wakefield]

Yeah, I will jump in here just to say, you know, a lot of manufacturing workers, union workers, they really were won over by Trump's promises that he was going to bring back manufacturing to the US and do it through tariffs, even if the reality of that is far more complicated and messy. I have also heard from rank and file workers who didn't support Trump, who think his tariffs are a bad idea, who nevertheless believe this presidency, the second Trump term, ultimately will be good for their jobs. Some of the other promises that Trump has made could provide them some job security if he lowers admission standards. For example, that could extend the longevity of gas powered models like trucks and SUVs, which are best sellers in America and are fueling those jobs.

[Scott Detrow]

Okay, so when it comes to incoming President Trump, we know how quickly he can change his mind. We know how quickly policies will be redirected. We're talking a month of some change before he actually takes office. Given all of that, do either one of you want to give us a reality check on how likely this 25% tariff is?

[Camila Domonoski]

Yeah, I'll jump in and say that this particular tariff, the president elect has talked about it. He described it in his post as being a negotiating tactic over immigration and drug trafficking. So the goal is not to have this tariff in place. So even if it is actually imposed, there will be a question about how long it will last. Paul Jacobson, he's a senior executive at General Motors. He was recently talking to investors and he said this.

[Scott Detrow]

You know, we're trying to not overreact to anything out there. In the short term, I understand the rhetoric that's out there, but I'm not going to overreact to a tariff if I don't know that it's not going to be traded away in 90 days for something else.

[Camila Domonoski]

You know, car companies plan years ahead, right. And any new factories would be open for decades. At the same time, I am hearing from folks that Trump has talked seriously about other tariffs, ones that he does not describe as bargaining chips, but as policies in themselves. And companies are taking those possibilities really seriously.

[Scott Detrow]

NPR's Camila Dominoski, who covers the auto industry, as well as Andrea Hsu, who covers labor. Thanks to both of you.

[Camila Domonoski]

Thank you.

[Jeff Wakefield]

Thank you, Scott.

[Scott Detrow]

This episode was produced by Connor Donovan. It was edited by Courtney Dorning, Emily Cobb and Cara Platoni. Our executive producer is Sami Yenigun. It's Consider this from npr. I'm Scott Detrow.

[Peter Slowly]

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[Andrea Hsu]

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[Peter Slowly]

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