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How The American Automotive Industry Is Coping With Trump's Tariffs

AUDIE CORNISH, HOST:

For months now, President Trump has been saying tariffs would lead to better trade deals for the U.S.

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PRESIDENT DONALD TRUMP: I want the barriers taken down. I want our farmers to be able to trade. I want to be able to sell cars in there just like they sell cars in here.

(CHEERING)

TRUMP: And it's all going to work out. It's all going to work out.

CORNISH: But the pressure has not led so far to new trade agreements. And yesterday, President Trump appeared to soften his tone in an effort to make progress with the European Union.

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TRUMP: We also will resolve the steel and aluminum tariff issues. And we will resolve retaliatory tariffs.

CORNISH: Now, before we look at what the president is trying to achieve with the European Union, let's understand what those tariffs have meant to an industry that depends on steel and aluminum. Michelle Krebs is an analyst for Autotrader. She joins us now to talk about how the auto industry is coping. Welcome to the program.

MICHELLE KREBS: Thank you for having me.

CORNISH: So the president and EU Commission President Jean-Claude Juncker committed to resolving tariffs on steel and aluminum. What's your sense of how the industry is responding? Do people feel assured?

KREBS: I'm not sure they feel assured, but certainly we're feeling the impact. And on the same day that they were talking about this, General Motors, Ford and Fiat Chrysler were reporting their second-quarter earnings. And all three said they were being impacted by the tariffs on aluminum and steel, that their costs were going way up. And they were actually reducing their forecast going forward.

CORNISH: Has this affected the price of domestic vehicle, say, for consumers?

KREBS: Not at this point. We think that it adds about $200 to $300 to the cost of a vehicle, and it appears right now that the automakers are absorbing that. But that is not sustainable over the long term. So I would expect over time we would see that passed along to the consumer.

CORNISH: What about the threat of tariffs on imported cars? The president said he's holding off on that for now while they negotiate. What does that mean to the auto industry here?

KREBS: Well, the auto industry is extremely nervous about tariffs and retaliatory tariffs. We would expect if there is - all of the tariffs that have been talked about go into effect and there's a full-blown - a trade war, it will actually hurt the American auto industry. At least in the short-term, we would expect car prices would go way up. When prices go up, sales go down. And when the sales go down, factories cut production and lay off workers. So it - the effects could be particularly difficult.

CORNISH: Now, the Commerce Department is still investigating European import autos and auto parts as a national security risk. What do you make of that?

KREBS: I'm not an expert on that kind of policy, but it seems to me that is going to be a difficult case to make. The auto companies have been doing extremely well in the recent years. We've also attracted a lot of foreign automakers to build vehicles here.

CORNISH: Right, like, the line's not so clear about what is a...

KREBS: It's not. Nothing's clear, and...

CORNISH: ...Domestically made vehicle.

KREBS: It's very messy. And then that we had the whole - all of the parts that come from all the different countries, and they cross borders multiple times - it will be a very difficult fabric to pull all those threads out of.

CORNISH: Michelle Krebs is executive analyst for Autotrader. Thank you for speaking with ALL THINGS CONSIDERED.

KREBS: Thank you. Transcript provided by NPR, Copyright NPR.