Drewry: Proposed US Auto Tariffs to Affect East-West Trade Routes

Car carrierImage Courtesy: Pixabay (Pixabay License)

Key U.S. ports, container lines and car carriers will all be adversely impacted should the proposed US auto tariffs be implemented in the second quarter of 2019, shipping consultancy Drewry said.

“In our analysis we assume tariffs will be imposed in 2Q19 (mid-May) and that US importers will start passing extra costs to consumers and supply chain stakeholders by 4Q19,” Neil Davidson, Drewry’s senior analyst for ports and terminals, said.

“We also assume some US importers will absorb all or part of the extra cost, while others will delay their decision and that some foreign finished vehicle producers may lower their prices to protect sales.”

Drewry’s study explored the impact of three different tariff scenarios; a low-intensity scenario with 5% tariffs imposed on all US imports of finished vehicles and auto parts, a medium-intensity scenario at 15% and a high-intensity scenario with 25% tariffs imposed.

The results showed that the volume of US finished vehicle and auto parts imports will likely be adversely impacted, with the most negative effect expected between 2020-2021. The US ports which would be most affected include Baltimore, Los Angeles/Long Beach and the Port of New York/New Jersey, Drewry said.

Regarding eastbound Transpacific trade routes, Japan, which holds 67% of the eastbound finished vehicle imports trade, is the sourcing country most exposed to tariffs. China is most exposed to the auto parts tariffs, holding 61% of the eastbound auto parts imports trade;

In the westbound Transatlantic trade route, Germany is the sourcing country most exposed to the Trump auto tariffs as it holds 63% of the westbound finished vehicle imports trade, and 78% of the westbound auto parts westbound trade.

“Any imposition of US tariffs on European cars and auto parts would represent a significant escalation of transatlantic tensions between the US and the EU and given the importance of these commodities could lead to a serious escalation,” Martin Dixon, Drewry’s director of research products, said.

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