Auto Tariffs Could Increase Cost of New Cars by $4,400

Auto Tariffs Could Increase Cost of New Cars by $4,400

According to research by the Michigan-based Center for Automotive Research (CAR), 25 percent auto tariffs will cost Americans dearly. How dearly? As a CBS affiliate summarized last week, we can expect:

  • 2 million fewer new vehicles sold per year
  • Total U.S. employment losses of nearly 714,700 jobs and GDP losses of $59.2 billion
  • A loss of 117,500 of 1.1 million U.S. new-car dealership jobs, with the average franchised dealership losing seven jobs
  • Increases in the price of the typical vehicle sold in the United States by about $4,400
  • An increase in used car prices due to heightened demand and constricted supply
  • Increases in the cost of vehicle maintenance and repair due to higher automotive parts prices “so even holding on to an existing vehicle will become more expensive”

Here are more reports on how the 25 percent tariffs on Chinese imports starting January 1 could have devastating effects on the U.S. auto industry with higher vehicle prices (both new and used), a significant drop in new car sales, major job losses for autoworkers and employees at dealerships, and increased maintenance costs for car owners.

1. New China tariff list creates risk of ‘downward cycle’ for U.S. auto industry:

Trump’s latest round of tariffs on Chinese imports will add costs to more than 100 car parts – a 10 percent levy [rising to 25 percent on January 1] on everything from tires and brake pads to engines and batteries – that go into vehicles made and sold in the U.S.

“It’s going to be felt by Americans, and it’s going to be a big deal,” said Peter Nagle, senior analyst at IHS Markit. “Tariffs are taxes on consumption. Eventually costs will be passed down to the consumer. This will drive vehicle costs higher. It also includes a lot of body shop equipment.”

“Tariffs are taxes on American consumers. We’re going to sell fewer cars. And not only do we buy car parts from the rest of the world, we sell parts to the rest of the world,” said [Kristin Dziczek, vice president at the Center for Automotive Research]. “It’s all going to cost more. … It starts a downward cycle that isn’t good. China can wait us out. For the car industry, this means a lot of efficiency they’ve gained from building up the global supply chain is lost.”

2. Buying a car before December 31 will save you money:

New tariffs imposed by President Donald Trump on auto parts from China will hit carmaker profits, cut sales and threaten to “start a downward cycle” in the critical industry, analysts said unanimously Tuesday. In addition, if you’re in the market for a new car, you probably should get to a dealership soon, because prices are going up.

Trump’s latest round of tariffs on Chinese imports will add costs to more than 100 car parts — a 10 percent levy [rising to 25 percent on January 1] on everything from tires and brake pads to engines and batteries — that go into cars made and sold in the U.S. “It’s going to be felt by Americans and it’s going to be a big deal,” said Peter Nagle, senior analyst at IHS Markit. “Tariffs are taxes on consumption. Eventually, costs will be passed down to the consumer. This will drive vehicle costs higher. It also includes a lot of body shop equipment.”

3. Tariffs could mean a 2M drop in car sales and cost 715,000 jobs, warns auto industry group:

[E]xperts note that China is a key supplier to the automotive aftermarket, with parts such as tires, wheels, filters, and wiper blades. That means consumers also are facing sharp increases in the cost of maintaining and repairing their vehicles.

But trade is a two-way street, and the U.S. is already beginning to feel the impact in terms of auto exports. Ironically, shortly before the Trump administration enacted the first round of tariffs on Chinese goods, that country announced plans to reduce its own duties on imported vehicles from 25 percent to 15 percent. Now, however, U.S.-made vehicles are subject to 40 percent tariffs, making them even less competitive with auto imports from Europe or Japan, as well as vehicles made in China.

BMW, the largest exporter of American-made vehicles to China, says it is looking for ways to maintain demand for the X5 utility vehicles produced in South Carolina, perhaps boosting sales in the U.S. or Europe. But Ford has already announced plans to cut production of the Mustang and other vehicles shipped to China.

The escalating trade war with China “will further harm the U.S. auto industry and American workers and consumers,” said John Bozzella, CEO of the Association of Global Automakers. “Retaliation by China to tariffs already in place has made U.S. auto exports uncompetitive and will eliminate our bilateral auto trade surplus.”

This article appeared at FEE.org at:  https://fee.org/articles/trumps-auto-tariffs-could-increase-cost-of-new-cars-by-4-400/