ohio to juárez and back again: why tariffs on mexico alarm the auto industry

by:HongXing     2020-08-20
President Trump has threatened that starting next week, if Mexico does not take action to reduce the influx of Central American immigrants crossing the southern US border, it will impose tariffs on goods imported from Mexico. S.
Proposed Tariff
This will start at 5% of the transit cargo, which may increase to 25% over time-
Will cause serious damage to the supply chain of the automotive industry.
To understand why, consider the harness of the vehicle --
The neural system of the car consists of a complex wire network connecting the electronic components of the entire body.
Sue Helper, an economist at the University of the West Reserve, said: \"It\'s a huge and heavy bundle of wires that become more complex as cars become more electronic . \".
\"If they do something wrong, you may have electrical problems that you can never solve.
\"All these wires are carefully laid out in the right configuration (
Different models)
And bundled together before being installed on the vehicle.
For cars made in the United StatesS.
This kind of binding almost always happens in Mexico
Especially in Juarez. It\'s time-
Labor costs are lower in Mexico.
But it\'s just part of the picture.
The terminals at the end of these wires may have been manufactured at the Aptiv plant in Warren, Ohio, and shipped to Juarez for assembly into a harness and shipped back to the United StatesS.
Installed in the car. Smaller, stand-
Separate parts have their own harness.
For example, a separation kit designed to stop out-of-control trailers starts with plastic boxes made by Hopkins manufacturing.
In Emporia, Kansas.
It was then shipped to Juarez where other components and wiring harnesses were installed.
Finally, the completion is good to return to the United States. S.
Go to the trailer or sell it to the consumer.
The goods began and ended in the United States. S.
But tariffs will be imposed under the new policy.
It is not clear how much impact these tariffs will be.
Hopkins is a company that manufactures separation kits and other automotive parts and accessories, and currently only needs to pay tariffs on the value added by the parts when they are in Mexico.
But CEO Brad Kraft said he was concerned that the White House\'s proposed tariffs could be imposed on the total value of the goods --
Can be 10 times higher than added value-
Every time it crosses the border.
If the tariff is levied like this, then when Hopkins Manufacturing brings the separation kit back to the United States,S.
In fact, the company will pay tariffs on its plastic boxes made in Kansas.
The automotive supply chain does not always involve parts that cross borders so many times.
But the system has been geographically dispersed over the past few decades.
This includes the wire binding work that was done in the United States. S.
Transferred to Mexico
Supply chain may change again in the future.
But experts say these special tariffs will not bring any jobs to the United States. S.
Instead, experts are concerned that they may push assembly work from Mexico to other countries with low labor costs, which may in fact lead to the loss of more American jobs.
\"The wires that go into these harnesses, the fabrics that cover around them and all the connectors are usually made in the United States,\" said Ann Wilson, senior vice president of government affairs at the Association of motor and equipment manufacturers.
\"So if we make it more expensive to make the wiring harness in Mexico. . .
They move these jobs elsewhere and we will lose them in the US.
\"This may be a problem in the long run.
At the moment, given the huge uncertainty surrounding these tariffs, businesses are not ready to make major decisions such as relocating factories.
Except for fluctuations-
5%, gradually rising to 25%-
It is not clear how long the tariff may last;
They are linked to progress on immigration, as defined by the government\'s \"sole discretion and judgment.
\"What must we achieve on immigration before the tariffs are suddenly canceled?
Aaron Lowe, senior vice president for regulatory and government affairs at the Automotive Care Association, asked that the association represents the company that provides after-sales auto parts and services.
\"Very, very vague.
\"Frontera radiator and parts, located on the El Paso border in Texas, operates several manufacturing facilities in Mexico.
It makes truck radiators that are no longer produced in the United States.
CEO Hugo LDO Ventura is considering buying products from competitors in India or Dubai if the tariff does reach 25%.
But planning is difficult.
\"We are not looking forward to planning for a year or two, but planning every week,\" Ventura said . \".
Kraft of Hopkins Manufacturing said he could not just receive and transfer the plant from Juarez in this uncertain atmosphere.
\"There is very little we can do,\" he said.
Really, there\'s only one thing.
Ready to pay tariffs-
And pass on higher costs to consumers.
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