EconAir

  AMERICAN AUTOMOBILE INDUSTRY Tariffs on imported cars should help  American car companies. But it is more complicated. Tariffs on "Mexico" will hit American car companies and their suppliers particular hard. Trump has   threatened to raise tariffs on Canadian car imports in order to "permanently shut down the automobile manufacturing business in Canada." Most of the imported cars from Canada are made by American car manufactures.  Almost half the cars sold in the United States are imports. About 23% of cars sold in America come from Mexico; another 10% come from Canada. Most of them are assembled by American car companies.  About $100 billion in parts and subassemblies cross the border and will have to pay the tariff, in addition to the tariff on completed cars that are imported. Price of cars in America will go up and possibly car sales will go down. American car manufacturers are in poor financial shape and  cannot afford to absorb the cost increases. O...

BACKGROUND Trump, of all people, does not seem to understand that companies, not countries, import and exports goods and services. Trump does not seem to understand that many American companies and industries have outsourced the production of their inputs, products and services to China, Mexico and Canada to lower costs and increase profits. They have already decided what to produce here and what to produce in other countries. Total American imports are around $3.5 trillion. Total exports are around $2.5 trillion. Both numbers include trade in services in addition to trade in goods. so the total trade deficit is around $1 trillion. Any higher tariffs the U.S. puts in imports will probably be matched by tariffs on U.S. exports. So while tariffs in imports will hurt foreign exporters, reciprocal tariffs will hurt American exporters. And imports of commodities like oil and copper, steel and aluminum, inputs and sub-assemblies that go into domestic American production are about 40% of t...