It’s clear that the goal of the United States tariffs on automobiles was to give American production a leg up. Adding costs to imports would - theoretically - encourage buyers to favor American-made vehicles, and encourage automakers to, perhaps, reshore their globally produced models.
But as with many complex economic questions, the reality is a bit less straightforward – as evidenced by GM’s latest announcement.
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The Detroit-based automaker, who has long operated three factories in South Korea, revealed last month that it would be investing in Korea further. The goal for GM is to increase production capacity for vehicles that would be exported to U.S. buyers.
GM’s Chevrolet Trax and Trailblazer, as well as the Buick Envista and Encore GX are currently produced across three factories in Korea which employ some 12,000 workers and churn out about 460,000 vehicles annually.
Recently, GM said it would invest $600 million in the plants, in hopes of reaching an annual production target of 500,000 vehicles.
And because these vehicles would be assembled 90% overseas, then each would come saddled with an extra $2,000 in tariff-related costs for GM.
But a report in the Wall Street Journal concluded that moving this production to the United States would add $3,000 in costs to each vehicle, and it would take several years to build the plant or plants needed to produce them.
Add to that the reworking of the supply chains and, of course, the ongoing higher labor costs that American workers would require, and you’ve got yourself a bit of a reshoring math problem.
GM said that it predicts tariffs will bring an expense of up to $4 billion this year, though it’s clear the pressure isn’t enough to budge the automaker from a cost calculation that still makes the most economic sense.
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