TOKYO: As the US-China trade war expands into the auto, steel and rare earths sectors, few companies are feeling the pressure more than top Japanese car parts supplier Daido Steel Co.
The supplier to Honda Motor Co and other major marques is facing a trio of headwinds: a 50% tariff on US imports of steel, a 25% duty on foreign-made cars and a levy on parts, and China’s tightening of exports of rare earths – minerals critical to make magnets for car motors.
“They’ve started putting up walls,” chief executive officer Tetsuya Shimizu said in an interview at Daido Steel’s headquarters in Nagoya. “This will have a massive impact on the stability of the global economy.”
It’s also having major implications for the sprawling network of specialty manufacturers that are critical to the global automotive industry and now find themselves stuck between feuding superpowers.
For Daido Steel, the trade war has meant renewing a push to build rare earth supply routes outside of China, which accounts for almost 70% of mined material and about 90% of global refining of the metals.
Some new routes are already starting to form, mainly from Australia, and Shimizu said there’s potential in the United States, Canada and Brazil.
But progress has been slow due to high costs and low supply, he said, underscoring the challenge facing the world’s efforts to wean from their dependence on China.
Daido’s struggles also signal the true toll of the trade war on the auto sector will be magnitudes more than the billions of dollars forecast by top carmakers including Ford Motor Co and Toyota Motor Co.
And the constant roller coaster of escalating and de-escalating tensions has left companies scrambling to maintain business ties under a cloud of uncertainty. — Bloomberg
