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On August 6, President Trump sent shockwaves through the auto industry as he threatened 100 percent tariffs on imported chips. After all, it wasn’t that long ago a semiconductor shortage related to the covid outbreak brought new car production grinding down to a slower pace.
Honda is walking away from EVs.
Part of the confusion about what this means for the auto industry has to do with how chips for cars will be classified by the federal government. As Investing.com points out, Barclays analysts see the semiconductors could be counted as automotive parts, like brake calipers or door handles, being subject to those lower tariffs.
Keep in mind, some countries and even the EU have been working out new trade agreements with the US that lowers the tariffs on new cars and components from 25 percent.
But if semiconductors used in vehicle electronics are subjected to the 100 percent tariff amount, that could have far-reaching implications for the auto industry.
During the covid shortage of chips, assembly plants had entire storage areas of rolling vehicles which didn’t have all the semiconductors installed and thus had to sit before being shipped to dealerships.
Manufacturers were leaving features out and issuing only one key fob per new vehicle in an effort to conserve chips. Those sorts of practices could return, if the supply gets pinched again. But this tariff move could have the opposite effect.
There is a catch with the semiconductor chip tariffs threatened by Trump. He said as long as companies are making at least some in the US, the tariff won’t apply. It’s obvious the president is trying to move semiconductor manufacturing stateside again, perhaps in part because of the shortages and the US’ inability to do much about the situation a few years ago.
That reprieve from tariffs includes if companies have committed to build manufacturing facilities inside the US.
Image via Jeremy Waterhouse/Pexels
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