Detroit's "big three" General Motors, Ford, and Chrysler all lowered their economics forecasts yesterday while pointing fingers directly at Trump's trade war.
Profits have dropped significantly because the price of metal is soaring under Trump's tariffs and what makes this all the more remarkable is the fact that Trump has barely even started.
From the Wall Street Journal:
“With regard to our total company outlook for the full year, the pressure from commodity prices and foreign exchange rates has been more significant than our original expectations,” Chief Financial Office Chuck Stevens told analysts on the company’s earnings call, according to a FactSet transcript.
“While we’ve been able to offset some of the headwind, the challenges have been greater than anticipated, and we expect approximately a $1 billion net headwind versus our original guidance."
General Motors (and probably other automakers as well) are reportedly planning to raise prices to compensate for the higher cost of commodities (metal) and the drop in sales they're seeing in China as a result of retaliatory tariffs.
GM would partially offset the commodity hit by negotiating price reductions with suppliers, raising prices on more popular models, and cost cutting, [Chief Financial Officer Chuck Stevens] told analysts.
Ford said tariffs could cost it up to $1.6 billion in 2018 in North America.
The automaker has also been hit by a 22 percent sales drop in China through May of this year and is seen as unlikely to be able to raise prices to offset tariffs there on U.S.-made vehicles, especially its luxury Lincoln models.
If automakers have underestimated the cost of Trump's initial round of tariffs on steel and aluminum, that seems like reason to believe we may all be underestimating the cost of his coming tariffs on actual cars and car parts.
Automakers and industry analysts have issued dire warnings about imposing tariffs on all foreign cars and parts and, more specifically, they say it would raise the average cost of popular cars, trucks, and minivans by thousands of dollars. That doesn't include the increase in price that we're going to see starting today.
Trump's happy talk with European Commission President Jean-Claude Juncker doesn't change the fact that this is happening right now and there's no indication it's going to stop anytime soon. It could get much, much worse.
I don't like alarmist rhetoric but I don't think most people understand where his could lead because most people have never seen anything like it. They're very far from perfect, but our trade deals have prevented something like this from happening for decades. Electing relatively normal politicians to the office of the presidency has prevented something like this from happening.
If you want to be optimistic, you might say it's a good thing that Trump is giving average Americans a lesson in basic economics and trade, albeit unintentionally. Trump is a case study in what not to do.
Polls show an almost complete inverse of public support for trade over the past year.
