North American bus manufacturers, transit associations brace for new 10% bus tariff

President Donald Trump released a proclamation on Oct. 17 that placed a 25% ad valorum tariff on the non-U.S. content portions of medium- and heavy-duty vehicles (MHDVs) and a 10% ad valorum tariff on buses without similar provisions, which took effect on Nov. 1—the most recent in a flurry of tariffs that have been implemented and adjusted since he took office in January. The tariffs are being implemented on the basis of a threat to national security under section 232 of the Trade Expansion Act of 1962.

While part of the new tariff package extended carve outs that would allow for U.S. content of an imported MHDV to not be tariffed under provisions in the United States-Mexico-Canada North American Free Trade Agreement by Buy America policy qualifiers, buses are excluded in the relief mechanism in clause two of the proclamation. The only explicit relief outlined in the proclamation comes in the form of exceptions for buses that were manufactured more than 25 years ago or if a region already has a superseding tariff agreement in place.

This additional 10% tariff comes atop tariffs already imposed on steel and aluminum and any other duties that may be charged under different tariff policies, like if a part being assigned duty under another tariff moves through the U.S. prior to the final assembly of the tariffed bus.

Experts suggest that the tariffs could raise transportation costs throughout North America. For instance, Canadian Urban Transportation Research and Innovation Consortium (CUTRIC) President and CEO Josipa Petrunic spoke to Mass Transit magazine about the impacts the proclamation could have on costs.

“The major impact is the price point’s going to get hit right away. The cost is going to go up for American cities and American transit agencies right away. Eventually, that will filter through to Canadian cities because so much finishing is finished in the U.S., so when that comes back over the border, manufacturers will have to pass on that cost,” Petrunic said. “Ultimately, what it means in the short term, the medium term and the long term is just fewer transit buses on the road.”

Petrunic explains the impact this could have on purchasing power, highlighting that for every 10 buses purchased, the cost of another bus has been spent on tariffs alone, a consideration that agencies will have to take into account when making purchase orders in the triple digits. 

She also explains the impact this tariff could have on climate change goals, saying that they could lead transit agencies to push off adoption of zero-emission buses because of the added cost hike on an already pricier product. This could have agencies buying another cycle of diesel-based buses due to cost, leaving the situation more tenuous for the next purchasing cycle. This would be due to the possible depressing of demand in the zero-emissions sector, leading North American manufacturers to possibly cut investments in developments of these buses and weaken the supply chains needed for their production.

“When the time comes, and we have a government that returns that is saying, ‘Hey, listen, climate action is really important because islands are sinking, and people are dying, and climate change is a real thing.’ At that point, we're going to be looking at potentially non-North American brands, which goes exactly against the goal of the tariffs,” Petrunic said. “We’re just gonna look at really dismantling and disabling our manufacturers in North America right now from innovating to keep up with foreign brands that will most certainly, in 10 to 15 years, take over if this doesn't change.”

Manufacturers and suppliers have also weighed in on the tariffs. New Flyer issued a statement to Mass Transit magazine as it further evaluates the situation.

“NFI is carefully reviewing the details of the recently announced new tariffs on buses and motor coaches entering the U.S. market and assessing its implications. As we evaluate the proclamation, our focus remains on supporting our customers and maintaining our commitment to delivering reliable, high-quality transportation solutions across North America,” the statement said.

Cummins, a U.S.-based engine supplier, also issued a statement that discussed the impacts the tariffs may have down the supply chain.

“While we make all of our engines for North America in the U.S. and our supply chain is primarily located here, we have a complex and interconnected network of specialized suppliers that takes years to develop. Imposing these new tariffs on medium- and heavy-duty trucks and buses impedes our ability to compete globally and locally, impacts our customers—with engine order levels already near historic lows—and negatively affects our supply chain and the ability for us to plan with confidence and clarity. We look forward to working with the administration as they continue to clarify and implement these new tariffs aligned with our shared goal of supporting American manufacturers like Cummins,” a Cummins spokesperson wrote.

Amidst this, the U.S. Senate voted for a second time to block Trump’s tariffs, this time imposed on Canada—a country that would feel significant impacts—which passed 50-46; though the votes are largely symbolic due to a House maneuver that blocks votes on tariff policy through January.

Canada may also be taking steps to prepare for a rise in costs, infusing its infrastructure fund, Build Communities Strong, with additional money in its latest budget released on Nov. 4. The fund now hosts C$51 billion (US$36.1 billion), though it’s not a dedicated public transit fund like the Canada Public Transit Fund. CUTRIC is urging the Canadian government to keep a high investment in public transit in the consolidated fund, reclassify public transit projects as “major projects” to accelerate approvals and project delivery and create nationwide Canadian content rules to fortify the industry in the country going forward.

Shouldering the burden of these tariffs comes down to transit agencies, funded largely through tax revenues and transit fares, meaning local governments are essentially paying back part of the purchase price to the federal government with tax dollars. While some major transit agencies may be able to absorb heightened costs due to the vastness of their ridership, others will have to look elsewhere to continue the same rate of purchases as planned.

“You can raise transit fares, but you're not going to be able to raise them enough to cover Donald Trump's tariff tax,” Petrunic said. “Somewhere the city is going to have to find more dollars, and that means taxing more, higher property taxes, congestion charges, higher parking fees and fines, using city fines as a cash cow. Some kind of creative cash creation is going to have to happen at the city level basically to pay a federal tax through buses.”

Mass Transit magazine continues to follow the impacts of tariffs on the transit industry’s North American supply chain. This is a developing story. Subscribe to our website and sign up for our newsletter to stay abreast of further developments. If you’ve been impacted by tariffs and would like to share your story, contact Mass Transit magazine Associate Editor Noah Kolenda.