Taipei, April 3 (CNA) Taiwanese auto part suppliers are considering the possibility of rolling out products in the United States after U.S. 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, which produces plastics, sheet metal parts and cooling devices used in vehicles, says it will continue to expand production in the U.S. According to the company, it has had production lines in the U.S. for more than three decades.
However, Tong Yang admitted higher production costs will push up prices not only for auto parts but also for finished automobiles in the U.S. market.
The comments came after Trump announced on Wednesday U.S. time that a 25 percent tariff on parts imported to the U.S. market will come into effect on May 3, while a 25 percent tariff on automobiles goes into effect Thursday. The levies are part of Trump’s fresh round of tariffs in which Taiwan faces 32 percent in reciprocal tariffs.
An executive from a multimedia equipment supplier for car use said Trump’s tariffs seek to encourage manufacturers to undertake production in the U.S.
The executive said many original equipment makers for car production operate facilities in Canada or Mexico, which allows them to enjoy tariff exemptions under the United States-Mexico-Canada Agreement (USMCA) but Trump’s 25 percent tariffs are expected to speed up the pace at which they invest in the U.S. market.
However, he raised concerns about a lack of laborers and high labor costs in the U.S.
Although auto parts suppliers are able to take advantage of automation to ease the impact from a labor shortage, high production costs are inevitable, he said.
Hushan Autoparts Inc., a door handle maker, which is observing the possible impact of Trump’s actions, said the new tariffs, which will boost product prices, are likely to reduce demand for auto parts, as consumers can postpone their maintenance needs or seek aftermarket components made by third-party producers other than the original equipment manufacturers.
Tong Yang said the global auto industry has suffered a shortage of original components and some U.S. insurers such as State Farm tend to use aftermarket parts with certification from the Certified Automotive Parts Association (CAPA), as a way to boost demand for aftermarket components.
According to the Taiwan Transportation Vehicle Manufacturers Association, several American insurers favor aftermarket components made by Taiwan suppliers which are more affordable but the quality is the equivalent of original equipment items.
Taiwan’s aftermarket products are able to help American consumers cut spending, while the products ensure service quality as well as transportation security, the association said.
Meanwhile, the association added that it regrets Trump’s latest tariffs as the levy is expected to affect Taiwanese auto part makers, adding 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.
The group called on Washington to think twice and maintain the current tariff level of 2.5 percent allowing everyone to win based on the foundation of well-established mutual trust between Taiwan and the U.S.
