The recently implemented 25% tariff on all imported automobiles and auto parts has sparked widespread concern in the automotive industry. In today’s episode of Inside Automotive, Cody Lusk, President and CEO of the American International Automobile Dealers Association (AIADA), shared his thoughts with us on this dramatic shift.
Yesterday, President Donald Trump formally confirmed the 25% tariff on imported autos and parts. Lusk points out that this move, although not entirely unexpected, is similar to the founding of AIADA when similar tariffs were placed on German auto imports due to a poultry dispute, creating a full-circle moment in the industry. Many dealers were caught off-guard by the administration’s firm stance on this tariff, which has been in the works since President Trump’s first term but was delayed by COVID-19.
Despite the shock, the dealer community has always been resilient and approached challenges with optimism. Dealers are already seeing changes in consumer behavior, with a significant sales spike just before the tariff went into effect as customers rushed to make purchases before the price increase hit. The uncertainty around the long-term impact of the tariffs has left dealers, manufacturers, and consumers in a state of anticipation.
Lusk highlights the escalating affordability issue for consumers. Monthly auto payments, already high at an average of $780, could increase further, exacerbating the strain caused by inflation and higher interest rates.
Despite the tariff, there’s no immediate rush for manufacturers to move production to the U.S. from countries like Canada or Mexico, as such moves are not easily made and would require long-term planning and investment. There are also broader economic implications, acknowledging that while the tariffs might be framed as a national security measure, they could have adverse effects on consumer spending and economic growth.
Ultimately, Lusk’s message to AIADA members is one of patience and adaptability. While navigating this new trade era will be challenging, the franchise model, which has a history of overcoming obstacles, remains a powerful tool for dealers to manage the uncertainty. He urges members to look for guidance as the situation evolves, keeping their optimism intact despite the difficult circumstances.
“The franchise model proves itself year in and year out, that we're the best at what we do. We'll find a way to get customers the vehicles they want. I worry long-term about the impact this will have on sales and jobs and the overall market and the overall economy of the U.S.” – Cody Lusk
