Trade Issues and the Impact on the Automotive Aftermarket
Monday, September 10, 2018
Today’s global trade environment is changing quickly, in large part due to new tariffs and trade policies implemented or being considered by the Trump administration. In this AAPEX blog, Aaron Lowe, senior vice president of regulatory and government affairs for the Auto Care Association, and Ann Wilson, senior vice president, government affairs for the Motor & Equipment
Manufacturers Association (MEMA) and its aftermarket division, the Automotive Aftermarket Suppliers Association (AASA), answer questions about current trade issues.
Question: President Trump has imposed tariffs on billions of dollars’ worth of imports from China, including some automotive parts, as well as tariffs on steel and aluminum. Are you hopeful about a negotiated outcome by the current administration or are the tariffs that have been imposed going to be in place for a long time?
Aaron Lowe: We are disappointed that the administration has not released any clear blueprint for what would be a satisfactory resolution of this trade dispute. While we clearly believe that there have been several trade issues with China, including the absence of enforcement of intellectual property rules, we are concerned that the tariffs are not currently leading to any meaningful action from China on these longstanding issues. Instead, the tariffs imposed by the administration and the retaliatory tariffs from China are beginning to have a negative impact on both U.S. and Chinese companies, with the biggest impact being on consumers. We think it is imperative that both sides attempt to resolve these trade issues through diplomatic means as soon as possible.
Ann Wilson: It is important to look at the previous announcements on tariffs on Chinese products. As the readers may know, the U.S. has now imposed tariffs on $50 million of goods – including motor vehicle parts. Although China and the U.S. continue to discuss, we still believe it is prudent for the industry to plan for the imposition of tariffs on some portion of the proposed $200B of goods.
Question: What will be the greatest impact on the automotive aftermarket from the imposed tariffs, will consumers pay more for auto repairs, auto parts, etc.?
Lowe: Based on the fact that in many cases, there are no alternative sources for components imported from China, the cost of the tariff is being passed on to the consumer as an additional tax. Ultimately, the increased parts costs are going to lead to higher repair prices for consumers, causing them to defer needed maintenance and repair. One of the tariffs of major concern is brake rotors, the vast majority of which are being sourced from China. Should consumers delay this repair, it could result in safety issues on U.S. roads, leading to increased accidents. In addition, the reduced demand for repairs will lead to significant job losses in the auto care industry. The Auto Care Association undertook a study which demonstrated that a 25 percent tariff on auto parts could lead to the loss of 100,000 jobs in the auto care industry, impacting every level of the distribution chain, including manufacturers, distributors, retailers and installers of these parts.
Wilson: MEMA and AASA continue to communicate a clear position on the recent tariffs and trade negotiations: such measures adversely impact the success and growth of motor vehicle parts manufacturers. MEMA has been a leading advocate for positive trade agreements that will ensure U.S. businesses can remain competitive in the global marketplace. The greatest impact in the aftermarket will be on repairs and replacement parts. In addition, it will be harder to get necessary raw materials into the U.S. These tariffs would adversely impact the success and growth of many American manufacturing businesses by placing manufacturers at a competitive disadvantage to their global counterparts and erode U.S. jobs.
Question: Are there ways for the aftermarket industry to get involved?
Lowe: A key action is to weigh in whenever the administration reaches out for comment, providing real world information on the negative impact that the tariffs are having on consumers and on employment by the industry. This message also needs to be sent to elected officials who must make their opposition known to administration. Information on the tariffs and what members can do about it can be found at the Auto Care website and at the www.drivingamericanjobs.com website.
Wilson: MEMA has just released a Trade FAQs document that can be downloaded here. It addresses many common questions on these important issues and can be shared with employees and customers who are interested in the impact of current trade measures on the aftermarket and parts manufacturers. Aftermarket professionals can support our efforts by contacting their members of Congress and telling them about the impact tariffs would have on their businesses. Resources and information to aid in communicating with members of Congress are at the MEMA Trade Resources Page, including links to send a message directly to elected officials.
Stay “in the know” about the latest government affairs developments at AAPEX
Attendees at AAPEX this year will have the opportunity to hear from two nationally known political pundits discussing the latest developments: Karl Rove, a political strategist best known for his knowledge of the major political issues of the day, and John King, CNN’s chief national correspondent and anchor of Inside Politics. The AAPEX Grand Opening Keynote Session, “Breakfast with John King and Karl Rove: How Trade and the Elections Could Impact the Aftermarket,” is a ticketed event set for 7 a.m. – 8:45 a.m., PDT, Tuesday, Oct. 30. in The Venetian, Palazzo Ballroom, 5th Floor.
Rove will focus on the global impact of President Trump’s imposed and proposed tariffs, as well as how tariffs potentially levied by foreign countries may impact U.S. businesses. King will discuss the upcoming mid-term elections and the impact the various outcomes could have on Washington, D.C., based on his experience covering the past eight presidential elections and reporting from all 50 states.
The grand opening keynote session will begin with a State of the Automotive Aftermarket Industry presentation by Bill Hanvey, president and CEO of the Auto Care Association, and Bill Long, president and chief operating officer of AASA. To reserve a table for the event, contact AAPEX Event Management, Chris Kalousek, CEM, firstname.lastname@example.org.