If the Trump Administration chooses to move ahead and implement 25 percent tariffs or quotas on American imports of automobiles and automotive parts, as promised, the Center for Automotive Research (CAR) has estimated that consumers will see the price of all new vehicles rise by $455 to $6,875 depending on the level of tariff or quota, where the vehicle was assembled, and whether the policy provides exemptions for automotive trade with Canada and Mexico. Higher prices for consumers would also depend on how much of the higher costs manufacturers will choose to absorb themselves and how much will be passed onto consumers, and that’s an unknown factor at this time.
Car dealers, concerned about the impact of rising prices on sales, have appealed to the Senate Finance Committee in an attempt to induce Congress to act. (Congress has the power to set taxes and tariffs on foreign goods but has largely chosen to leave it to the White House.)
Steve Gates of the Gates Auto Family in Richmond Kentucky, a self-identified “third-generation car guy,” spoke recently before the Senate Finance Committee, indicating that the tariffs would cause a domino effect on the automobile economy.
“The price of a car goes up. The price of parts goes up. It means that your insurance goes up as well,” said Gates. “Believe me, people leave dealerships because of a $5 difference [in a monthly payment] — $120 is a huge difference. If a 25 percent tax is levied on imported vehicles and parts, it won’t matter how good of a car dealer I am, people can’t or won’t buy cars. They will just be too expensive.”
It’s likely that consumers would begin searching for used cars to save money, which, in turn, would raise the prices of used vehicles, pricing even more people out of the market. This, in turn, would push up the costs of vehicle service.
“Affordability concerns are not new to our industry,” Gates told the Senate Finance Committee. “Over the past 20 years, the average cost of a car has risen 35 percent while household income has grown only three percent.”
The White House believes that while the tariffs may cause short-term pain, they’ll be worth it if they force China into playing by more equitable international trade rules.
“They [the tariffs] have created prosperity, and right now the president’s tariffs policies are doing just that,” said National Trade Council Director Peter Navarro.