Tariffs create uncertainty in automotive industry, says former Toyota exec

Key Points
  • President Trump's tariffs on $34 billion worth of Chinese goods went into effect Friday 12:01 a.m. EST.
  • China immediately retaliated with tariffs of its own.
  • Among the items affected are autos.
  • Vehicles built in the U.S. and sold overseas are subject to tariffs up to 40 percent, compared with a 25 percent tariff on autos made in China and then sold in the U.S.
How US-China trade war could damage auto industry: Former Toyota exec

The Trump administration’s tariffs might hurt the car and truck industry more than help, auto industry veteran Jim Press told CNBC.

“The reality is that tariffs normally don’t go away once they’re enacted,” Jim Press said on “Closing Bell” Friday. “It’s not a negotiating tactic. And it causes a great deal of uncertainty in investment decisions, production decisions, design of product. It’s a very difficult situation for the auto companies.”

U.S. tariffs on $34 billion worth of Chinese goods went into effect at 12:01 a.m. EST on Friday. China immediately implemented retaliatory tariffs on its own. Beijing called it the "biggest trade war in economic history."

The Chinese tariffs will impact a number of American sectors, including agricultural products and autos. Now, vehicles built in the U.S. and sold overseas are subject to tariffs of up to 40 percent. Vehicles made in China and sold in the U.S., however, pay only a 25 percent tariff. In addition, China imports fewer cars to the U.S. than the other way around.

The U.S. exported 267,000 autos to China last year, and has a trade surplus of $6.4 billion in the auto sector with China.

"The reality of our cars going to China, we don't make the kinds of vehicles that the Chinese would be using on their roads with their fuel economy," said Press, who is now president of RML Automotive.

The move left many wondering how automobile manufacturers in the U.S. will cope with higher prices. Mercedes-Benz, which builds SUVs in Alabama, has not said yet how it will address the issue. BMW, however, said the tariffs would affect retail prices of models shipped out of South Carolina to China. Tesla also said in a note to consumers in China that they should expect higher prices.

Press, who spent more than four decades in the auto industry, including tenures at Toyota, Ford Motor Company, General Motors and Chevrolet, as well as serving as co-president and vice chairman of Chrysler, said nothing good comes out of trade wars.

"The outcomes are normally bad," he said. "In this case, it's really not merited based on the current situation in the U.S. auto industry. But it is perhaps a political effort to try and put pressure on China. I don't see how that's going to help American consumers."

A worker secures the wheels of an Hyundai Accent vehicle onto the back of a transporter truck during loading ahead of distribution at the Hyundai Motors automobile plant in St Petersburg, Russia.
Andrey Rudakov | Bloomberg | Getty Images

President first proposed tariffs last March in an effort to fix what he deemed unfair trading practices and help both American consumers and business owners. Tariffs against , and the European Union went into effect on June 1. Since then, Mexico, Canada and the European Union have issued retaliatory tariffs of their own, targeting items such as agricultural products, steel, motorcycles and spirits.

“Obviously, free and fair trade is the objective,” Press said. “And having zero tariffs is an outcome that’s appealing. But there may be a better way to get there than starting with the nuclear option.”

— CNBC's Patti Domm contributed to this report.