Local car parts manufacturers hit ‘alarm’ button as Trump makes new US tariff call

The real cost of tariffs are coming to light, as businesses such as Richard Davies’ face uncertain futures amid escalating trade tensions.

US President Donald Trump announces tariffs on auto imports in the Oval Office of the White House. Picture: Mandel Ngan/AFP

Family-owned Australian companies will “unfairly” suffer due to tariffs on cars and car parts imports soon to be implemented by Donald Trump and the White House.

The US President on Wednesday (US time) announced “a 25 per cent tariff on all cars that are not made in the United States” as trade tensions between the world’s biggest economy and its closest neighbours escalate.

Given the United States-Mexico-Canada free trade agreement, automotive manufacturing has become highly integrated in North America, with Mr Trump’s latest tariffs call representing a new level of the conflict, after initially delaying auto tariffs when first announcing broad duties on goods from Canada and Mexico.

The auto tariffs will be implemented on April 3, a day after Mr Trump’s so-called “Liberation Day” where markets will be keenly watching as he announces further reciprocal tariffs.

On the home front, as Australia no longer manufactures cars, car parts manufacturers and exporters such as Davies Craig stand to be worst hit.

Davies Craig managing director Richard Davies (R) with staff on the factory floor. Picture: Supplied

Based in Altona North, west of Melbourne’s CBD, Davies Craig manufactures and sells electric fans and water pumps for auto engines.

A family-run business since its inception 53 years ago, Davies Craig earns 40 per cent of its business from US exports, totalling $2.2m per year.

Davies Craig managing director Richard Davies called US-Australian auto trade a “one way street” and called the tariff hit on his business “unfair”.

“Australia spends billions on American cars, and they don’t buy any from us, so they’re doing very nicely out of Australia,” he said.

Mr Davies said his business could compete with current duties imposed on his cooling products, but his US sales were now under “dramatic” threat.

“(The tariffs) will hit our sales in America dramatically. As it is — and these products are very price sensitive — with freight, et cetera, we can just compete. But now, we can’t, it tips us over the edge, it’s a worrying thought.”

Due to the timing of the tariffs lining up with the start of the domestic election cycle, with the government soon to be in caretaker mode, Mr Davies called on the next government to threaten a 25 per cent tariff on American cars coming into the country — “so both sides would lose” — and figure out an exemption.

Mr Davies also pointed out Davies Craigs products were used in American military vehicles, tanks in particular: “They didn’t think of that”.

Meanwhile, world powers on Thursday (US time) blasted US President Donald Trump’s steep tariffs, urging retaliation as trade tensions intensify and price hikes appear on the horizon.

Major car exporter Germany called for a firm response from the European Union, while Japan said it “will consider all options.” Canadian Prime Minister Mark Carney said Thursday the “old relationship” of deep economic, security and military ties with Washington “is over,” adding he expected to speak with Trump in the next day or two.

Experts warn of higher vehicle costs, and Italian carmaker Ferrari said it would raise prices on many models sold to the United States by up to 10 per cent from next week.

Global stock markets slumped with shares in automakers like Toyota, Hyundai, Mercedes and others falling. Wall Street’s main indexes closed lower as shares in General Motors and Ford fell.

Investors hit reverse on automotive retailers and car parts manufacturing stocks on Thursday and Friday in response to US President Donald Trump imposing painful tariffs on all imported vehicles and parts.

The move affects foreign-made cars and light trucks, with key car parts to be hit within the month.

The Australian Automotive Aftermarket Association (AAAA) said the move had left its members “alarmed and deeply concerned”.

Japan’s government called the tariffs “extremely regrettable”, while Canadian Prime Minister Mark Carney called it a “direct attack” on his country’s workers.

The April 3 start date comes one month after Mr Trump delayed auto tariffs after first threatening them on the grounds that Canada and Mexico were not doing enough to stop the illicit smuggling of fentanyl into the US and in a push to boost US domestic manufacturing.

AAAA CEO Stuart Charity said the tariff would apply on Australian-made automotive parts including engines, transmissions, drivetrain parts and electrical components.

He said Australia’s largest exposure lies in the export of performance parts and 4WD accessories, including vehicle modifications designed for off-road touring, recreational use, and specialised enhancements for mining and defence applications.

“Both AAAA and our members are understandably anxious about the potential ramifications of these tariffs,” he said in a statement. “While Southeast Asia and the Middle East are emerging markets our members are making inroads in, the United States remains a significant export partner with a consistently high demand placed on Australian-made 4WD components and accessories.

Canadian auto body union Unifor’s auto workers stand behind new Canadian Prime Minister Mark Carney. Picture: Frank Gunn/AP

The AAAA is in contact with the Department of Foreign Affairs and Trade to clarify exactly which components will fall within the scope of the new tariff.

Mr Charity said his members feared the tariffs may expand to other vehicle components and accessories in the coming months.

“We urge the Australian government to continue engaging in diplomatic efforts to secure exemptions for our industry,” he said. “ Historically, proactive engagement has resulted in positive outcomes, as it did in 2019, when Australia successfully negotiated exemptions from similar US tariffs.”

Trump’s announcement saw shares in carmakers around the world take a hit. In Japan, Toyota – the world’s top-selling carmaker – fell two per cent, Honda shed 2.5 per cent while Nissan was off 1.7 per cent and Mazda dived six per cent. Seoul-listed Hyundai gave up more than four per cent.

PWR managing director Kees Weel said his business was well placed to weather any impacts from the tariffs.

“PWR has a flexible and global manufacturing footprint which positions us well to adapt to the evolving terms of trade,” he said.

“Our diversified customer base and product offerings are broader than car-related components following the growth in our aerospace and defence business.

“At this stage it is too early to assess the impact of announced tariffs, but we will continue to monitor the evolving landscape”.

Stephen Innes from SPI Asset Management said the auto sector is the epicentre of the economic fallout from trade wars, with its globally integrated supply chains, slim margins, and massive cross-border employment footprint.

“Target autos, and you’re not just bruising one sector – you’re disrupting consumer sentiment, choking off corporate investment, and sending shockwaves through global trade flows,” he said. “Tariffs on widgets are background noise. Tariffs on cars? That’s the headline risk with teeth.”

He said markets are staring down the barrel of the worst-case macro cocktail: “faster inflation, slower growth, and a fresh wave of volatility.”

Additional reporting: AFP

Originally published as Local car parts manufacturers hit ‘alarm’ button as Trump makes new US tariff call