Trump has proposed tariffs of 20% on steel. They could hurt automobile manufacturers that rely heavily on steel. Lets take a look how
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A tariff is essentially a tax imposed by a government on imported goods. In this case, the tariff on steel would increase the cost of steel imported into the United States, which could lead to higher expenses for companies that depend on this material.
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An analysis suggests that such a tariff on Canadian exports to the U.S. could result in $1.5 billion to $2 billion in additional annual costs for U.S. consumers. Moreover, the United States is notably reliant on imported aluminum, with 82% of its annual consumption being sourced from countries like Canada and Mexico, and it imports 38% of its copper needs, as detailed by BNP Paribas.
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General Motors, a major player in the global automotive industry, produces approximately 6 million vehicles annually, each containing about 2,000 lbs (roughly 1 ton) of steel. With steel costs typically ranging from $800 to $1,000 per ton, GM's annual expenditure on steel is estimated to be between $5 and $7 billion. A 20% increase in steel prices could therefore raise GM's steel expenses by $1 to $1.4 billion per year, potentially reducing net profits by 10 to 14% if the company absorbs the cost.
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Despite these challenges, GM has several strategies to mitigate the impact of rising steel costs. The company might increase vehicle prices to pass some of the cost onto consumers, utilize long-term supply contracts to delay the financial effects of the price hikes, and implement cost reductions in other areas to offset the higher steel prices.
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GM CEO Mary Barra has publicly addressed the issue, expressing cautious optimism, noting, "We believe the president wants to use policy and regulations in ways that will strengthen, not harm, domestic manufacturers like GM."
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She has emphasized the company's proactive engagement with policymakers and strategic planning to mitigate impacts on operations. Barra’s statements indicate that GM is prepared to adapt its strategies to maintain its competitive edge in the automotive market despite potential economic pressures.
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The actual impact of the steel price increase on GM’s bottom line will depend on the company's ability to effectively implement these pricing strategies and cost management measures, as the automotive giant continues to closely monitor the situation and adjust its approaches accordingly.

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