Swedish automaker Volvo and Chinese parent company Geely are delaying plans to go public because of global trade uncertainty spurred by President Trump’s tariffs.
“The timing right now is not optimal, given an escalating trade war, tariffs, and market volatility,” a spokesperson told the Washington Examiner. “An initial public offering remains an option, but there is no fixed timeline.”
The announcement, first reported by the Financial Times, comes as automakers are struggling to adjust global manufacturing operations to curb the added costs from Trump’s duties on both raw materials and Chinese imports.
General Motors, which previously lowered its profit target for the year due to higher raw material costs from the tariffs on steel and aluminum imports, warned that a possible 25 percent tariff on auto imports currently under consideration would lead to higher prices and layoffs.
[Also read: Apple Watch, AirPods will cost more under Trump’s China tariffs, tech giant warns]
Across the U.S. auto industry, a 25 percent tariff would trim output by 1.5 percent and cost 195,000 U.S. workers their jobs over a period of one to three years, according to figures cited by the Auto Alliance, a trade group for companies behind 70 percent of U.S. auto sales. Buyers of imported cars would pay an average of $5,800 more, costing American consumers about $45 billion, based on 2017 sales data.
“If imports of automobiles and auto parts are subjected to tariff increases or other restrictions or adjustments, U.S. consumers and the American economy as a whole will pay a heavy price,” Volvo’s Katherine Yehl noted in the company’s response to Trump’s tariff proposal. The Gothenburg, Sweden-based carmaker recently opened its first U.S. manufacturing plant.
The $1.1 billion project was the first brand-new automobile factory in the U.S. in almost a decade, Volvo said. Spanning 2.3 million square feet and capable of building up to 150,000 cars a year, the plant may employ about 1,500 workers by the end of 2018.
Ford Motor Co., meanwhile, abandoned plans to sell the Focus Active crossover from China in the U.S., as Trump threatens to raise the amount of imports targeted from a current $50 billion to more than $500 billion. On Sunday, he tweeted that Ford could now begin to build the vehicle in the U.S. without worrying about the levies, a suggestion the carmaker promptly rejected.
“We made a business decision to stop development of the Focus Active crossover for U.S. customers due to the negative financial impact of new tariffs on vehicles imported from China,” the Dearborn, Mich.-based company said in a statement. “It would not be profitable to build the Focus Active in the U.S., given an expected annual sales volume of fewer than 50,000 units and its competitive segment.”
The auto industry is simultaneously bracing for the outcome of the White House’s negotiations with Canada over an update to parts of the North American Free Trade Agreement.
A tentative deal reached between the U.S. and Mexico would force some manufacturers to increase production in the U.S. to meet new requirements that 75 percent of each vehicle is produced in North America. Operations could be shifted from Mexico to meet a separate requirement that at least 40-45 percent of the car is made in factories that pay their workers at least $16 an hour.
