Steel, aluminum tariffs may hurt auto industry, supply chain risk expert says

Related: Canada, EU hit back at US with tariffs as trade war escalates

Ted Krantz, CEO of Interos.ai, said tariffs on steel and aluminum could hit the U.S. automotive manufacturing industry hard. Arlington, Virginia-based Interos.ai is a supply chain risk intelligence company.

“Our data shows there’s 400,000 companies impacted, and 3% of that is manufacturing for the auto industry,” Krantz told FreightWaves in an interview. “We anticipate, just in terms of carry costs on vehicles, assuming … the $25,000 average cost, that’s an incremental almost $6,500 in additional costs that ultimately have to be passed on to the consumer.”

Krantz said the U.S. supply chain for steel, aluminum and auto parts made of rubber and plastics depends heavily on foreign imports.

Trump paused until April 2 across-the-board tariffs that had been set for March 4 on goods from Canada and Mexico that comply with the United States-Mexico-Canada Agreement. However, Trump said he is considering imposing reciprocal tariffs on Canadian lumber and dairy products soon.

“The complexity of the supply chain is pretty interesting, because you’ve got our top sources for steel are China, then India, No. 1 and No. 2, respectively. Then there is a 20% combination of Mexico, Italy and Germany. Our dependency on those top five is very high in this sector,” Krantz said.

Trump imposed a 10% tariff on Chinese goods in February and doubled the rate to 20% on Tuesday. China has responded with up to 15% duties on U.S. foods such as beef, chicken and pork that began March 10.

“The China disruption is going to have a more prolonged, complex outcome,” Krantz said. “Thinking of other sources besides China for, you know, our import and export opportunities, or companies headquartered here in the U.S., in other Asia-Pacific areas of opportunity outside of China, I think that is probably a more likely scenario. I do think that the spiciness geopolitically with China will take longer to play out and could actually have more edge than even what we see with Canada and Mexico.”

Much of Trump’s trade policy is aimed at bringing more foreign investment into the U.S., creating more factories and jobs for Americans.

Taiwan Semiconductor Manufacturing Co., the world’s biggest chipmaker, recently agreed to invest $100 billion in the U.S.

While changing supply chains and manufacturing locations quickly will be difficult, Krantz said, companies need to have alternate suppliers ready in case tariffs begin to disrupt their traditional logistics operations.

“Most of these big companies, they know their Tier 1 supplier, but they’re not as educated on Tier 2 or Tier 3,” Krantz said. “[Companies need] to start shifting and thinking outside of … Canada, Mexico and China. What other alternative sources are there for some of these supplies? I do think that’s going to be a big focus for the Fortune 1000 companies.”

Related: Ontario drops surcharge on electricity sales under threat of US retaliation