How Trump’s Tariffs Can Affect Scrap Car Prices

Recently President Trump has imposed controversial tariffs on aluminum and steel, imported from Europe following on from a previous tax applied to China imports. He is allegedly fulfilling a promise to his voters, to get jobs back in the USA steel industry, that has seen a decline in recent decades. As UK is still within the European Union, these tariffs could affect British steel manufacturing, if the USA starts to buy less steel from the UK.

Steel manufacturing

Steel Supply and Demand

The very thing that affects steel prices in the UK, is supply and demand, when the market is flooded with Chinese steel, metal prices drop and when there is more demand and less supply, metal prices rise. However this new tariff could mean and even greater supply to the local market, as less is exported, pushing prices down.

Value of End Of Life Vehicles Could Be Diminished

Scrap cars contribute to the supply when melted down by authorised re-cycling centres. It can then be re-used in other metal based items such as washing machines etc. Over 90% of new vehicle manufactured today, must be re-recyclable, even plastics. So in short an abundance of steel, means the value of your scrap car is diminished. A large factor in what price is offered for a salvage or end of life vehicle, is how heavy the metal content is, when they “Weigh in” the vehicle.

A solution could be to import less of our own steel requirements from China, but often the reason why companies import in the first place rather than use, home suppliers such as Tata, is lower costs. China, just sell it cheaper than us, probably due to a large supply of Iron ore and of course the typical lower wage costs in China.

What we don’t know, is how long these tariffs will stay in place and what will happen, when the UK leaves the EU. Would we get and exception for example? Taking into account previous language and the “Special Friendship” we have with the USA, we would assume it will be business as usual after Britain leaves Europe. But lets be honest, with President Trump, nothing is to be assumed.

Fundamentally the difference between a scrap yard and auto breakers (Junk Yard in the USA), is what happens to much of the metal components on the retired vehicle. With an auto breaker, it is normal for them to attempt to re-sell the parts, to be used on other vehicles, but scrap yards tend to buy cars and other metal items, in order to melt down.

Europe responded with it’s own tariffs on USA manufactured goods that has sparked off what may be a trade war.