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Trump, Tariffs and Trucks: A trade war is bad for trucking

Posted: June 8, 2018 by John G. Smith

Apparently Americans see Canada as a security threat.

It was surprising news, but there was U.S. President Donald Trump, invoking the role of national security when imposing tariffs on steel and aluminum. “Didn’t you guys burn down the White House?” he reportedly asked Prime Minister Justin Trudeau.

Sorry about that. Isn’t that the Canadian thing to say?

Aside from some important technicalities – it was British troops who burned the White House in 1814, after Americans attacked York (today’s Toronto), and Canada wasn’t established until 1867 – the comment is nothing short of absurd. Even if it was a joke.

It would be tough to find closer allies. There is a reason we share the world’s longest undefended border, protected by little more than the wads of red tape that slow truck traffic to a crawl. We have been at each other’s side through thick and thin as long as there are no skates or hockey sticks involved.

But on the eve of a G7 summit hosted by Canada, the now-defined northern threat to U.S. security, we found ourselves mired in a trade war.

The U.S. has imposed 25% steel tariffs and 10% aluminum tariffs on Canada, Mexico and the European Union. For our part, we have retaliated with tariffs on products from states that could swing political allegiances during U.S. midterm elections, which are most likely the focus of Trump’s trade-related measures in the first place.

In the midst of it all, NAFTA negotiations crawl along, sent into regular disarray by selective tweets from the man who occupies the now-rebuilt White House on Washington’s Pennsylvania Avenue.

None of this bodes well for the trucking industry. Trade wars of any sort upset the flow of goods from one country to the next. Those who haul aluminum and steel southward will undoubtedly see shifts in freight volumes. The longer the tariffs exist, the worse that will get.

It’s not the only concern. Trucks and their related components, after all, rely heavily on steel and aluminum. Someone will have to pay the rising price of the all-important commodities. For now that is being absorbed by manufacturers and mills alike. Left unchecked, the costs will likely lead to higher prices for trucks and trailers.

Martin Daum, who leads Daimler’s truck and bus divisions, says he is always concerned about tariffs and trade wars.

“This is one of the big mistakes we tend to do, that we become more and more nationalistic,” he said during a recent briefing in Portland, Ore. “All problems are global problems … We don’t think in national borders anymore. I don’t think about the passport an employee has.”

Indeed, the business of building trucks has become increasingly international in nature. Parts and finished products roll back and forth across borders under the umbrella of international trade deals, often on the very trucks and trailers that are being created. Today’s manufacturers are establishing increasingly global identities as well. Daimler, Volvo, and Paccar all have connections to Europe and beyond. Europe’s Volkswagen now has a stake in Navistar. Hino has roots in Japan. The list goes on.

But nationalistic tariffs on steel and aluminum threaten to increase the cost of producing vehicles and parts, depending on their country of origin.

“Those costs eventually, at the end of the day, have to find their way through the whole value chain,” said Roger Nielsen, president and CEO of Daimler Trucks North America. He doesn’t believe that will play a role in slowing North America’s robust truck market. The freight still needs to move, after all. “When they need trucks, they need trucks,” he said of buyers.

But in the name of political gains, there will be a price to pay. Even if we didn’t torch the White House.

 

 

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