Tariffs on Auto Glass

In every business, the bottom line is what can decide whether you continue to be a business, or have to fold.  Government factors like taxes and tariffs can end up being integral parts on how much is made on certain goods.  This past May the Trump administration increased tariffs from 10% to 25% on $200 billion worth of Chinese products.  

 

Within the products targeted were auto glass with this tariff applying to glass frit, glass mirrors, laminated safety glass, and a variety of different float glass materials.  These tariffs come as the United States and China are amidst a trade war where the working class are the ones most affected. Additionally, with the US imposing these tariffs it has triggered China to impose its own making products for both sides for costly.

 

The United States has been buying more and more auto glass from China over the past decade.  Our consumption of these goods has gone up 400% over the past 13 years.  Currently it is estimated that we ship in approximately $300 billion in auto glass which means that the auto glass industry is sure to feel the hit.  So what does this mean to the everyday auto body shop owner and mechanics?

What does this mean for consumers?

These tariffs will urge companies to take their business out of China so they do not need to pay as much in import fees.  Oppositely though, the production and manufacturing power that China has means that many companies are sure to continue passing on the cost to glass shops.  With a 15% rise in tariff, it over doubles the previous amount meaning the industry will have to balance out and look for other outlooks where they can create or import auto glass from.  The costs will be, more than likely, passed on to the end consumer which could lead to a decline in both auto sales and after-sale services.

 

Many industry leaders look to Mexico as a possible remedy as we already import a substantial amount of auto glass and materials from them.  A possible issue with this is that Trump also hinted at adding this tariff to Mexican made automobiles as well. This would lead to an average rise of $1,300 per vehicle within the US experts believe.  

 

With all these import tariffs being put into place it is logical to believe that car makers will be slowing production.  Estimates put the cut in production at around 18%, which could be as many as 3 million vehicles. Mexico is currently our largest producer of auto parts so if they end up with similar tariffs to China it could lead to lesser consumer spending based on the price inflation due to tariffs.  Some of the most integral parts of many vehicles are made in Mexico like their wire harness. These are parts that cannot be left out and inserted later with over 70% of all wire harnesses coming from Mexico.

Future Decisions:

There is a new trade deal that automakers are strongly in favor of that is due to replace the United States Mexico Canada Deal.  This is because this deal states that there will not be additional taxes or tariffs on automotive parts.  Trump has already placed additional costs on steel and aluminum, which are both integral parts in creating an automobile. Automakers voice their opinion that it is in the best interest of all parties not to start additional trade wars that could send car prices skyrocketing.

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