Queen – Another One Bites The Dust
According to the Nikkei Asian Review, Honda Motor Company will expand the output of its Acura luxury vehicles in China by shifting production overseas for its SUV model, rather than importing it from the US.
The shift in production could be problematic for the company’s Anna, Ohio engine plant; the all-wheel-drive system plant in Russells Point, Ohio; its transmission plant in Tallapoosa, Georgia; and the SUV’s assembly line located in East Liberty, Ohio, which have been supplying parts and finished vehicles to the world’s second-largest economy.
As we have explained before, the protectionist crusade of the Trump administration has caused tremendous harm to complex international supply chains, the repair of which will be expensive and will be profoundly disruptive to future business planning and investment plans.
On Monday, we showed how other automakers are taking similar steps to avoid tariffs including Volvo, which is now canceling US production plans for much of its lineup to avoid duties the US and China have enacted on auto imports.
President Trump imposed tariffs of 27.5% on Chinese auto imports in July. China then retaliated with 40% duties on American autos.
The new Chinese-made Acura RDX will be produced by Guangzhou Automobile Group and Dongfeng Motor Group located southeastern China.
Production of the new RDX started late summer at the Guangzhou Automobile plant. Previous versions of the car sold in China were imported from the US, a blow to Acura’s manufacturing facilities stateside that could experience a tremendous slowdown in production.
Honda decided to shift production to China before July when President Trump launched his trade war earlier in the year.
By shifting production overseas, Honda will maintain cost competitiveness and capture more local demand. Vehicles would be free from the higher tariffs, although some components will still be imported from the US and thus subjected to minor taxes.
Honda expects China-made Acura RDX to be about 20% cheaper than the previous US version, which is priced at 399,800 yuan ($57,400).
Add Acura to the list of companies greatly suffering under President Trump’s trade war.
Disruption and reworking international supply chains involve lots of time and money, something that the global economy cannot afford so long into a mature expansion. That is why an economic slowdown could materialize for developed economies in 2019 – most likely will be blamed on the trade war and perhaps monetary tightening by the Federal Reserve.
Storm clouds are here, Acura and Volvo shifting production away from the US is just more evidence that supply chain disruptions from trade wars are causing economic uncertainties.