Alabama’s five automaking companies are mulling over possible moves in response to the Trump Administration’s proposed tariffs.
The Wall Street Journal is reporting that though the president’s moves toward eliminating a trade deficit are currently on hold, they could prompt several companies to shift production to the U.S.
Trump on Tuesday said he was considering tariffs of 25% or more on automobiles, as well as semiconductors and pharmaceutical products.
Tariffs are taxes charged by one nation on goods imported from another nation. The companies pay tariffs to the government. They are usually calculated as a percentage of a product’s value.
Economists say that while tariffs have some benefit, companies tend to pass the cost of tariffs on to consumers.
In his Tuesday remarks, Trump said companies doing business in the U.S. may be given a grace period to provide time to move production to the U.S. Those tariffs could be enacted by April 1.
All of Alabama’s auto makers are non-U.S. firms – Mercedes-Benz in Germany, Honda, Toyota and Mazda in Japan, and Hyundai in South Korea.
And each has their own production strategies. A quarter of sales from Toyota came from the U.S., as well as 29% for Hyundai and almost two-fifths for Honda, the Journal reported.
Looking at last year’s sales, about 1 million of the 2.33 million vehicles that Toyota sold in the U.S. would have been subject to the 25% tariff.
Mercedes manufactures its SUVs in Alabama, but ships sedans from Europe to the U.S. market. About two-thirds of the vehicles made by Mercedes-Benz in the U.S. are shipped globally.
On Thursday, Mercedes-Benz CEO Ola Källenius, who formerly ran the Vance factory, mentioned the significant investment the company has made in the U.S., particularly Alabama. Since the 1990s, Mercedes has invested more than $7 billion into its production factory, logistics center and battery plants in Tuscaloosa and Bibb counties.
The company is prepared to invest billions more, he said. That could include making sedans here.
“We’re also an American company,” Källenius said, according to Yahoo Finance. “Yes, we have our headquarters in Germany and we have European origins, but we feel American. I myself have spent six years of my Mercedes career in the United States too. My children are born in the United States. I feel deeply, deeply connected to the U.S.”
The Korea Times this week reported that Hyundai is mulling over increasing production at its plant in Montgomery, as well as its Georgia facility. The Montgomery plant currently has a capacity of 356,000 vehicles a year. It was not clear how much production might increase.
Christopher Richter, investment firm CLSA’s senior analyst for Japanese autos, told CNBC that Toyota and Honda stand to be the most affected by tariffs, as they make models in Canada and Mexico.
Honda, last week in an earnings call, mentioned the possibility of moving some production elements to the U.S. in the short-term by the end of this month, but provided no specifics. About 550,000 Honda vehicles produced in Canada and Mexico are sold in the U.S. each year.
But Richter also said that if Trump should add autos from other countries to the tariffs, Mazda might be affected as well.
The Asahi Shimbun is reporting that Mazda sold about 420,000 vehicles in the U.S. last year, with more than half imported from Japan.
Add in the vehicles from Mazda’s plant in Mexico, and about 70 percent of Mazda vehicles sold in the U.S. market could be subject to a tariff.
A Mazda spokesperson told the paper that the company is “currently reviewing all possible options and preparing to take the most appropriate countermeasures.”
Earlier this year, Tom Donnelly, CEO of Mazda North American Operations, told The Wall Street Journal that the company “could consider building more vehicles in Alabama” or importing them from Japan. Mazda currently makes the CX-50 in Huntsville.
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Publish date : 2025-02-20 19:31:00
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