The National Automobile Dealers Association (NADA) is warning that while the 10 percent tariff Trump will impose on Monday will be a significant hit to the industry, the 25 percent tariff Trump will impose on January 1st will be the killer.
The tariffs on $200 billion in Chinese goods that Trump will formally impose on Monday will automatically increase to 25 percent on January 1st and the Dealers Association says the price of buying a car will increase by at least $4,400 and by nearly $7,000 in some cases.
From the Detroit Free Press:
“NADA recognizes the importance to the United States of leveling the trade playing field; eliminating unfair trade practices; and keeping America’s automotive industry strong,” said the organization's president and CEO, Peter Welch. “But a 25-percent tariff applied to all imports would hurt auto manufacturers, dealers, consumers and the economy as a whole. And the hardest hit would be our customers.”
He said industry analysis outlined a scenario where a 25-percent tariff "would see the price of the typical vehicle sold in the United States rise by $4,400. Prices of U.S.‐assembled vehicles will rise because of an increase in the cost of imported vehicle parts, adding $2,270 to the price. For the typical imported vehicle, these tariffs raise consumer prices by $6,875 per vehicle.”
Dealers are understandably worried about this because this means even fewer people will be able to afford a car and a large number of dealerships could become ghost towns. Dealers will cut staff and possibly close.
All told, the industry expects Trump's 25 percent tariff will lead to 2 million fewer cars sold each year and over 700,000 job losses. The cost of used cars is also expected to increase as fewer people can afford new cars.
I had not thought about it a great deal before now, but I can scarcely imagine the bloodbath that could occur if a blanket 25 percent tariff is on the books when the next recession arrives.
The automobile industry came perilously close to death during the last recession and that was with no tariffs on the books; no trade war. President Obama will not be around bail them out this time. They'll have to deal with the nincompoop in the White House.