US tariffs on imported trucks and buses come into effect
What's the story
The US has imposed new tariffs on imports of medium- and heavy-duty trucks. The 25% tariff on trucks and the 10% duty on buses came into effect today. However, vehicles entering under the US-Mexico-Canada Agreement (USMCA) will be partially exempted from these tariffs. The move comes after a Section 232 investigation under the Trade Expansion Act of 1962, which allows such tariffs if imports are deemed a threat to national security.
Trade strategy
Tariffs won't affect existing duties on steel, aluminum, autos
The Trump administration has used Section 232 investigations to impose tariffs on various goods in a bid to boost domestic manufacturing and punish countries seen as exploiting the US. Other sectors, such as steel, aluminum, and autos, have also been hit with hefty tariffs of up to 50% on steel and aluminum and 25% on autos. However, these new truck tariffs won't be added to existing duties on these goods.
Import sources
Over 70% of heavy trucks imported into the US are...
Most of the US's truck imports come from its immediate neighbors, Mexico and Canada. A United Overseas Bank report in October estimated that over 70% of heavy trucks imported into the US are from Mexico, while those from Canada make up about 20%. Under the new regime, trucks eligible for favorable USMCA treatment will only have their non-US content subject to the 25% tariff.
Economic impact
Mexico's heavy vehicle exports to the US fell nearly 26%
The trade pressure has already affected Mexico, with its heavy vehicle exports to the US falling nearly 26% year-on-year (YoY) between January and August. The Mexican economy contracted by 0.3% YoY in Q3, weighed down by industrial sector weakness. Mexico is still negotiating with the Trump administration for a deal to mitigate the impact of these wide-ranging tariffs.