Taiwanese auto part suppliers are considering the possibility of rolling out products in the US after US President Donald Trump slapped a 25 percent tariff on foreign-made auto parts overnight, but remain concerned about their bottom line given the unavoidable increase in operating costs.
Tong Yang Group (東陽), which produces plastics, sheet metal parts and cooling devices used in vehicles, said it would continue to expand production in the US.
It has had production lines in the US for more than three decades, the company added.
Photo: CNA
However, Tong Yang admitted higher production costs would push up prices not only for auto parts, but also for finished automobiles in the US market.
The comments came after Trump announced on Wednesday that a 25 percent tariff on parts imported to the US market would come into effect on May 3, while a 25 percent tariff on automobiles goes into effect immediately. The levies are part of Trump’s fresh round of tariffs in which Taiwan faces 32 percent in reciprocal tariffs.
An executive from a car multimedia equipment supplier said that many original equipment makers for car production operate facilities in Canada or Mexico, which allows them to enjoy tariff exemptions under the US-Mexico-Canada Agreement, but Trump’s 25 percent tariffs are expected to speed up the pace at which they invest in the US, he said.
However, the executive raised concerns about a lack of laborers and high labor costs in the US.
Although auto parts suppliers could take advantage of automation to ease the impact of a labor shortage, high production costs are inevitable, he said.
Hushan Autoparts Inc (虎山), a door handle maker which is observing the possible impact of Trump’s actions, said the new tariffs, which would boost product prices, are likely to reduce demand for auto parts, as consumers could postpone their maintenance needs or seek aftermarket components made by third-party producers other than the original equipment manufacturers.
The global auto industry has suffered a shortage of original components, and some US insurers such as State Farm tend to use aftermarket parts with certification from the Certified Automotive Parts Association as a way to boost demand for aftermarket components, Tong Yang said.
According to the Taiwan Transportation Vehicle Manufacturers Association (台灣車輛公會), several US insurers favor aftermarket components made by Taiwanese suppliers, which are more affordable, but the quality is the equivalent of original equipment items.
Taiwan’s aftermarket products could help US consumers cut spending, while the products ensure service quality as well as transportation security, the association said.
The association said it regrets Trump’s latest tariffs, as the levy is expected to affect Taiwanese auto part makers and the tariffs fail to reflect Taiwan’s entire tariff reality.
The 25 percent tariff is expected to boost maintenance costs and insurance compensation spending, and eventually hurt consumers, it said, urging Washington to maintain the current tariff level of 2.5 percent.
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