Auto industry tallies cost of Trump's threatened Mexico tariffs

DETROIT: Major automakers are assessing the cost of tariffs that US President Donald Trump has threatened to impose on Mexican imports, both to themselves and their supply chain, and are planning to delay some vehicle shipments, people briefed on the plans told Reuters on Tuesday.

Trump has said he will apply tariffs of 5% on Mexican goods on June 10 if Mexico does not halt the flow of illegal immigration, largely from Central America, across the US-Mexican border. Those tariffs would gradually rise to 25% by Oct. 1 if Mexico does not satisfy Trump's demands.

The shipment delays would affect vehicles with high inventory levels on US dealer lots if the tariffs take effect as threatened. Automakers are trying to speed some critical parts shipments this week ahead of the Monday deadline.

In an email seen by Reuters, Toyota Motor Corp told its US dealers the duties could cost its major suppliers between $215 million and $1.07 billion.

The email, dated June 3, from Toyota's North American sales chief, Bob Carter, also told dealers that 65% of the Tacoma midsize pickup trucks the Japanese automaker plans to sell in the US market in 2019 will be imported from its plant in Baja, Mexico.

On Tuesday Kevin Clark, chief executive at auto supplier Aptiv PLC told investors at a conference in Boston that a 5% tariff would cost it around $17 million per month.

Speaking to reporters on the sidelines of a conference in Montreal on Tuesday, Steve Kiefer, senior vice president, global purchasing and supply chain at General Motors Co, declined to discuss how much tariffs could cost but said "the single biggest problem we have is the uncertainty with tariffs."

"Right now, we're asking all of our suppliers to be calm and not do anything drastic," Kiefer said.

Automakers are pressing Republican senators on Capitol Hill to contact the White House to try to convince the president not to move ahead with the tariffs, which could raise costs and slow vehicle sales, the people briefed on the matter told Reuters.

Consultancy LMC Automotive said on Tuesday the industry could absorb a 5% percent tariff for a month, but that a sustained period at the 25% tariff level would have a potentially devastating impact on the auto industry and cut US new vehicle sales by up to 1.5 million units annually.

Last year, automakers sold 17.3 million new vehicles in the United States.