With the Canadian auto industry anxious about what might happen if US President Trump follows through on plans to scrap the North American Free Trade Agreement (NAFTA), the American industry is worried about what might happen if steel is priced beyond reason.
The results might be trade wars, retaliation from other markets and resultant difficulties in obtaining the materials, says Automotive News. All would result in higher costs to purchase vehicles.
Of particular concern to the American administration is the effect of Chinese steel on the industry, because the country’s subsidizing of its steel producers, which the US claims has lead to overcapacity, and inferior grades of steel and aluminum. However, it’s also allowed costs to remain low but it has lead to the decline of American steel production, including the closing of some production facilities.
Although American steel producers are turning out high quality product, a lot of that is going toward military, aerospace and infrastructure applications, which leaves auto manufacturers scrambling for metals to use in vehicle production. The US is the largest importer of steel in the world, bringing in 30.1 million tonnes annually, with most of that coming from Canada, Brazil and South Korea.
In the face of what it feels is dumping of steel in the American market, the Trump administration has several recourses, including setting import quotas, raising import tariffs or capping the amount of steel it allows into the country.
“Uncertainty is what’s problematic for the industry, and the most likely outcome for any remedy proposed is higher prices,” Kristin Dziczek, director of industry, labor and economics at the Center for Automotive Research, told Automotive News.