THE IMPACT OF 2018 STEEL AND ALUMINUM TARIFFS ON THE AUTOMOBILE INDUSTRY

Open Access
Author:
Davey, Hunter
Area of Honors:
Supply Chain and Information Systems
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Robert Alexander Novack, Thesis Supervisor
  • John C Spychalski, Honors Advisor
Keywords:
  • Automotive Industry
  • Tariffs
  • Steel
  • Aluminum
Abstract:
The objective of this thesis will be to examine the automotive supply chain from procurement of raw materials to assembly, to determine the impacts of the March 23rd Section 232 steel and aluminum tariffs on auto makers and their suppliers, and to provide recommendations to auto makers on how to reduce costs and remain profitable. The result of the Section 232 steel and aluminum tariffs was a significant increase in domestic production of both steel and aluminum, as well as a market-wide increase in the real prices of these raw materials. Due to the long lead time of steel and aluminum products, auto makers and their suppliers have not had the time to make a significant adjustment to their supply chains and avoid the tariffs. Instead, auto makers have instituted automobile price increases and elimination of low-profit lines in order to cut their losses as they struggle to find domestic suppliers of raw materials. Recommendations to auto makers include continuing to modestly raise prices of automobiles and eliminate low-profit lines and invest in high profit lines, while considering more local sources of both domestically produced and recycled steel and aluminum.