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Canadian parts association calls for U.S. ‘bully’ to be ‘punched in nose’ over steel tariffs

Thursday, May 31, 2018 @ 2:01 pm – Automotive News Canada

The man representing Canada’s automotive parts industry pulled no punches Thursday in responding the United States slapping a 25 per cent tariff on Canadian aluminum and steel.

Flavio Volpe, head of the Automotive Parts Manufacturers Association, unleashed a series of angry tweets following the news that the tariffs will go into effect Friday at 12 a.m. ET.

“I expect Canada, Mexico and the Europeans to respond by punching the bully in the nose,” Volpe said. “Probably more importantly I expect major consumers of steel in the U.S. to respond in American courts.

The United States is using Section 232 of the U.S. Trade Expansion Act to assert the tariffs, claiming Canadian steel poses a national security threat.

“Regarding 232 tariffs: The auto sector operates on single digit margins. Applying arbitrary and punitive tariffs on the main ingredients of all structural and drivetrain components in every car is nonsensical madness,” Volpe tweeted. “The results of these tariffs is to court countervailing tariffs in the main US export markets. All we end up with is everybody paying more and sharing pain.”

Volpe then continued to rant in the media.

“I can’t see how treating your deepest trading relationships with acute disregard is going to be treated as anything but bad faith at the NAFTA table,” Volpe told Bloomberg News.

OTHERS CRITICAL

Volpe wasn’t alone in criticizing the move.

Manufacturers and business groups slammed President Donald Trump’s decision to impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico, warning of promised retaliation and calling it a tax on U.S. companies and consumers.

The U.S. Chamber of Commerce urged the administration on the eve of Thursday’s announcement not to proceed because the tariffs would hit U.S. manufacturers with higher costs, impede construction-sector growth and hurt job creation in both industries. Expected widespread retaliation from abroad would also threaten the economic momentum the administration has achieved through tax and regulatory reform, the chamber said.

U.S. steel prices are already almost 50 percent higher than those in Europe or China, and aluminum prices have been extremely volatile, the chamber added. The new tariffs “would add substantially to these challenges,” the group said.

“Months ago, the U.S. Chamber warned that alienating our strongest global allies by launching a tit-for-tat trade war would harm the U.S. economy and undermine American leadership,” Myron Brilliant, executive vice president and head of international affairs, said in the statement. “This is even clearer today.”

Some Republican lawmakers objected as well, with Senate Finance Committee Chairman Orrin Hatch calling the tariffs “a tax hike on Americans.”

PRICE INCREASES

The administration’s actions have already caused higher prices for key products, said Cody Lusk, president of the American International Automobile Dealers Association trade group.

“American consumers will continue to bear the brunt of a trade war with our key economic partners,” Lusk said in a statement. “The decision to forge ahead with these steel and aluminum tariffs will adversely impact the price of consumer goods, including the millions of new vehicles Americans buy each year.”

Auto-parts makers were already facing trade challenges and uncertainties on several fronts, including Nafta re-negotiations, previous tariffs on Chinese imports and possible duties on imported vehicles and parts, said Ann Wilson, senior vice president of government affairs for the Motor & Equipment Manufacturers Association, which represents vehicle suppliers. The industry depends on regulatory and market stability, she said.

“These actions have thrown all of that up in the air,” Wilson said in a statement. “There is little doubt that the uncertainty and added costs the administration is creating will put U.S. investments and jobs at risk.”

NOT ALL COMPLAINTS

The American Iron and Steel Institute praised the move and said it supports the administration’s policy that any country granted an exemption from tariffs must be subject to a quota. “We thank the president for his actions to ensure a strong American steel sector that is fundamental to our national and economic security,” Thomas J. Gibson, the group’s president and chief executive, said in a statement.

The EU has indicated that it will impose tariffs on American-made blue jeans, t-shirts, and footwear, and the ability to export “Made in USA” products is essential for the health of U.S. manufacturing and its workers, the American Apparel & Footwear Association said.

“To make this move against our closest allies, especially during the renegotiation of Nafta, creates more difficulty and chaos for the business community,” Rick Helfenbein, the group’s president and chief executive officer, said in a statement. “Let’s be clear, Made in USA apparel and footwear will suffer as a direct result of this action by the Trump administration.”

The Aluminum Association, representing producers including Alcoa, said it was “disappointed” by the expansion of the tariffs because the real problem is overcapacity in China caused by “rampant, illegal” government subsidies, said Heidi Brock, the group’s president and chief executive officer.

“Today’s action does little to address the China challenge while potentially alienating allies and disrupting supply chains that more than 97 percent of U.S. aluminum industry jobs rely upon,” Brock said in a statement. “During a time of record demand for aluminum in the United States, it is critical that aluminum producers across the value chain have a steady and reliable source of supply.”

TIGHT SUPPLY

Can-makers rely on metal imports because there is not enough domestic supply to support demand, according to the Can Manufacturers Institute, a trade organization. Members of the organization have applied for exclusions from the tariffs and are still waiting to hear back, Robert Budway, the institute’s president, said in a statement.

“The administration’s actions artificially create winners and losers in the very competitive packaging space,” Budway said.

Commerce Secretary Wilbur Ross displayed cans of Campbell soup and Budweiser during a March television appearance, when he argued the tariffs would have not have a major impact on U.S. businesses.

‘DOUBLE-DIGIT INCREASES’

Campbell Soup Co., however, recently said that it expects to face “double-digit increases” on steel and aluminum prices, with the higher costs weighing on profit margins. The anticipated tariffs were part of the reason that company cut its guidance for the next fiscal year.

Senator Hatch, a Utah Republican, said he will continue to push the administration to change course because of the “mounting evidence” that the tariffs will harm U.S. consumers.

“My position remains unchanged: Tariffs on steel and aluminum imports are a tax hike on Americans and will have damaging consequences for consumers, manufacturers and workers,” Hatch said in a statement.

Bloomberg and Greg Layson of Automotive News Canada.

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