With today’s announcement to layoff 15% of it’s North American salaried workers and closing of 5 auto plants, General Motors has now become the most high profile victim of Trump’s “the greatest!” trade war.
This past summer, GM cut its profit forecast for this year due to tariffs on steel and aluminium and it has now lost $1 billion in profits due to higher tariffs.
Both Ford and Fiat Chrysler are expected to cut their profit margins further and consider serious options like laying off their salaried workers and shutting down factories as Jeff Schuster at LMC Automotive estimates that tariffs could cost the U.S. auto industry at least one million annual vehicle sales. The American Automotive Policy Council, on behalf of GM, Ford and Fiat Chrysler, estimated that a 25 percent levy would create an $83 billion tax burden for the U.S. auto industry and consumers.
The great irony here is that automakers and many other companies saved on Trump’s tax cuts and now much more will be wiped off by Trump’s tariffs. The tax bill was intended to spur economic activity, but steel and aluminium tariffs hurt so it will have the opposite economic effect. For example, if automaker A saved $250 million in quarterly tax bill because their tax liability went down from 35 percent to 21 percent, but they ended up paying $400 million in tariffs due to higher steel and aluminium costs, then how is this deal beneficial and a net plus for automaker A?
Trumbull County, OH, voted for Obama by 23 points in 2012. Then, voted for Trump by 6 points in 2016, a 30-point swing. With today’s GM announcement of plant closing after losing $1 billion to Trump’s tariffs, it is not an exaggeration to say that decent, hardworking people of Ohio were conned by a conman.
Earlier today, President Trump commented on GM’s situation. He says he was very touch on GM and it’s CEO Mary Barra.
Later in the evening, Congressman Tim Ryan (R-OH) who represents the district where GM is closing plant and where these mass layoffs will take place said that President Trump’s assertion that he was tough with GM is “an absolute joke” and “he did not lift one finger” to save these jobs in Ohio and prevent these factory closures.
You be the judge.