US auto imports hit a new all-time high in the first half of the year as auto production is surging in lower wage countries such as Mexico and a strong dollar is hindering US exports.
The overall US trade deficit rose 7.1%, adjusted for seasonal fluctuations, to US$43.8 billion in June. Autos, which include vehicles, parts and engines, accounted for more than one-third of the trade deficit as US auto imports rose to US$29.8 billion, the US Census Bureau reported in August.
US exports of autos are down US$3 billion in the first half of 2015 to US$74.8 billion. Auto exports were flat in June at US$12.6 billion – up just US$62 million.
By contrast, US imports of autos rose by US$10.8 billion to US$171.5 billion in the first six months of the year.
The US exported US$1.4 billion in cars to Mexico in the first half of the year. During that same period, the United States imported US$11.3 billion in cars. Exports of US truck and other larger vehicles to Mexico were US$630 million, while Mexico sent the United States US$14.5 billion in truck and other vehicle exports. The total automotive trade deficit with Mexico – including parts, engines and other vehicles – was US$35 billion in the first half of the year.
Global automakers are dramatically boosting production and building new plants in Mexico. Toyota Motor Corp. relieved in April plans to build a US$1 billion factory in Mexico to manufacture a radically new Corolla compact that will go on sale as its 2020 model. The automaker cited a combination of low costs of doing business in Mexico, strong regional supplier base and new technology system called Toyota New Global Architecture (TNGA) that should make the 2020 Corolla more competitive on price.
Consequently, Mexico is now ranked as the seventh-largest auto producer and fourth-largest auto exporter in the world.
The United States sent Japan about US$1 billion in total auto exports in the first half of the year, while Japan sent the United States US$25 billion in cars, trucks and parts.
Both nations are fighting in ongoing free trade talks over rules that would make each country more attractive for production. One major issue centering on free trade agreements and the proposed Trans-Pacific Partnership (TPP) is currency manipulation, which makes an exporting country’s goods artificially cheap in terms of the importing country’s currency. The Center of Automotive Research (CAR) in Ann Arbor, Michigan, points to existing problems it says are even deeper: imbalanced trade and tariffs.
In 2011, the US had an automotive trade deficit with Japan of about US$42 billion that accounted for more than two-thirds of the total US trade deficit with that country, CAR says. Second, the 2% to 25% tariff that Japanese vehicles and parts manufacturers must pay when entering the US market currently would eventually be eliminated completely by the TPP. Further, CAR contends Japan’s inclusion in an FTA would result in the increase in Japanese vehicle exports, all other factors being equal, of about 105,000. Not only would there be a significant loss in Japanese production in the United States, but jobs too.
The Japanese Automobile Manufacturer’s Association (JAMA) reports the TPP stands to reverse the long-term trend of European auto market share in Japan increasing over that of US automobile manufacturers by opening the Japanese market to the US. But CAR again stresses that at risk would be over 336,000 vehicles exported from the US by Japanese car makers that manufacture in the United States.
There is also the issue of over US$51.3 billion in US-made auto parts that are purchased by Japan. The TPP would allow Japan to replace at least some of those by sourcing non-TPP and even some TPP parts for cars entering duty free into the US market.
Additionally, the US auto trade deficit is soaring. In May, the United States imported US$29.4 billion in autos – nearly as much as July. In the first half of the year, the US imported US$171.5 billion in autos, up US$10.8 billion.
Auto imports have been rising steadily. Americans bought US$254 billion in imported automobiles in 2011, US$298 billion in 2012, US$309 billion in 2013 and US$328 billion last year. The auto trade deficit is also rising: it was US$156 billion in 2013 and US$169 billion last year.
A strong US dollar also makes American exports more expensive in local currency terms and makes exports to the United States cheaper in dollar terms.
Meanwhile, business at key seaports in the United States remains brisk. At California’s Port of Hueneme, automotive traffic there increased by 10.6% to more than 321,000 autos in fiscal year 2014-2015.
A large percentage of the import increase was driven by foreign manufacturers redirecting autos intended for other markets to Hueneme and other ports for temporary handling. However, auto exports, which reflect approximately 2% of the port’s revenue, dropped by 26.6%.
BMW narrowly edged Hyundai/Kia in the import arena with a strong 14.4% growth. BMW’s overall processing volume through the Port of Hueneme’s Vehicle Distribution Center has increased over the same period last year and this trend is expected to continue for the remainder of this year.
Wallenius Wilhelmsen Logistics is the leading shipper handling agricultural and heavy equipment cargo at the port, and provides shipping and technical processing for automobiles.
Last year, a record 792,795 cars made their way across the public and private marine terminals at the Port of Baltimore, up from 752,100 in 2013. For the fourth consecutive year, the port handled more cars than any other US port.
Helping the business was the October 2014 opening of a new auto berth at the port’s Masonville/Fairfield Marine Terminal. The new berth is 1,175 feet long (about 360 metres), nearly 90 metres longer than its old berth. It is also wider, expanding from 110 feet (about 33 metres) to 130 feet (about 40 metres). It can support 1,000 pounds per square inch, compared to only 100 pounds per square inch for the old berth, and is equipped to handle rail transport.
By Karen E. Thuermer
Correspondent | Washington
