The Trump administration has announced a significant shift in trade policy, imposing new import taxes of 25% on cars and car parts entering the United States from overseas. This ruling will be implemented on April 2. It promises to be one of the most transformative things to happen to the American auto industry and to consumers since the Ford Model T. Last year the US imported almost eight million vehicles. This represented nearly $240 billion in bilateral trade and almost 50% of U.S. passenger car sales. The tariffs are intended to drastically curtail these imports. Experts are predicting they will increase the average price of cars by at least 5%.
The US International Trade Commission is predicting that the new tariffs will cut car imports by almost three-quarters. For Americans, this translates to an increase in vehicle sticker shock, with the average $13,000 car jumping up more like $14,500. More expensive vehicles from brands like Audi, BMW and Mercedes will face increases as well. Higher cost will be absorbed by the wealthier buyers, but the total economic cost to consumers and dealers will still be tremendous.
“New cars are really out of the reach of a good number of Americans to begin with,” – John Heitmann
The US already has one of the highest car ownership rates in the world, at nearly 92 percent vehicle ownership per household. In American culture cars are the quintessential emblem of freedom and success, which makes these tariffs not merely an economic question. They represent an existential threat to the nation’s auto industry. The tariffs will further interview car dealers or dealers to increase prices, thus killing sales and putting careers at risk.
“We all still have bills to pay, mouths to feed and employees to pay,” – Mohamad Husseini
Hyundai has committed recently to a $21 billion investment in the US. That includes thrilling plans to construct a new, low-emissions steel plant in Louisiana. Once opened, this new development will generate thousands of jobs and catalyze billions in economic activity for the space-starved region. As a practical matter it’s still unclear how this investment can possibly make up for the tariffs’ wide-ranging impacts.
For most American consumers, the higher costs that would come with purchasing a new car under these expanded tariffs will be out of reach. Young people like Mya Fountain-Bunch are deciding to stick with the cars they have instead of buying new ones.
“I’m making sure that my car is working and hopefully I won’t have to buy another car in the next few years, or at least the next four years until this administration is done with.” – Mya Fountain-Bunch
Likewise, poet Jeannie Dillard is putting off buying a new car until she feels more solvent.
“I have to wait until my finances improve.” – Jeannie Dillard
“It took me a long time to save up for the last car,” she said. “If prices get too high, I’m obviously not going to buy something that I can’t afford.” – Jeannie Dillard
It’s not just consumers who are caught in the vise of these new policies. INCREASED TARIFF COSTS Manufacturers are already struggling with increased production costs due to tariffs. Consequently, they face immense pressure to optimize pricing strategies and inventory management.
“We haven’t seen anything in writing yet.” – Part supplier in the UK (quoted by John Heitmann)
Consumers will have to think twice when deciding whether to buy a domestically manufactured vehicle or an import. As Robin Sloan said, it would give folks pause to only purchase American-made vehicles because they were pressured by tariffs.
“I don’t think I would buy a car made in the United States just because of the tariffs, I think I would probably wait a few years until things settle down,” – Robin Sloan