The Auto Sector: The Front Line of the US Trade War

While the “hang tough” policy of the US trade war with EU countries and China is intended to bring them to the table, in the vitally important auto sector the signals are mixed in terms of progress, and the impact here in America are beginning to set in.

Last week, Chinese owned Volvo Cars, which committed to a billion dollar US manufacturing operation in South Carolina, opening the plant last June, is now changing its production plans in that factory which could have negative trade balance, consumer cost and employment impact here in the United States.

According to Anders Gustaffson, President of Volvo Cars in the US, the company has scrapped production plans that would have had S60 Sedans produced by American workers exported to China. They will also stop the supply of the highly acclaimed Volvo XC60 SUV coming from China to the US and limiting the imports of high-line S90 sedans.

Speaking at the Automotive Press Association in Detroit Gustaffson said the company has so far absorbed the direct cost of the tariffs by holding off passing the cost onto consumers, which is reflected in the company’s financial reporting this year.

But the reduced availability of strong selling models like the XC60 and the high margin S90 luxury sedan will certainly result in higher transaction prices at the dealer level, as they respond to simple supply and demand pressures and seek to make up inventory shortfalls.