It’s rare to find something that creates as much unity in the car industry as President Trump’s proposed tariffs on automotive imports. Manufacturers, dealers, and mechanics are presenting a united front in opposition to the 25% tariff which will be brought before the president for a ruling on May 18th. Though the administration’s economic advisor, Larry Kudlow, has hinted that this deadline isn’t set in stone, that hasn’t stopped the many branches of the industry from lobbying hard to ensure the tariffs don’t pass.
The Fear
Last month the Center for Automotive Research made waves when they published a detailed report investigating the effects the tariffs will have on the industry. In the worst-case scenario the group examined, there would be a total of 366,900 US jobs lost, a drop in light-duty vehicles sales 1,319,700 units a year, and the average price of US light-duty vehicles rising by $2,750. Even if policies were applied in different ways than the worst case scenario described, the report warned “No matter how these policies are combined, they operate to raise consumer prices for new vehicles, while lowering U.S. light vehicle sales, U.S. Gross Domestic Product (GDP), and total and new vehicle dealership employment.”
The Reaction
Naturally, the reaction to the report, and to other analyses of the effects the 25% tariffs will have, has been alarm. Though the steel and aluminum tariffs already imposed have been difficult for the industry, there was a level of understanding: the tariffs do protect the interests of American steel and aluminum workers. These now imminent ones are being met with less magnanimity. Afterall, today’s auto market is a global one. Manufacturers have portions of their operations overseas, receive parts from abroad and do a brisk business selling to other countries. There are many dealers in the US who likewise have international business.
Penalizing these groups will have a far-reaching impact. As noted by the Center for Automotive Research, the tariffs will drive up prices. This will, in turn, affect the volume of new vehicles manufactured and sold. In a domino effect, dealers, suppliers, mechanics, and employees all along the chain will find themselves in binds or out of work. Already the industry is feeling the pinch as brands, experiencing the beginnings of lean sales, are cutting plants and workers. The tariffs will send them tightening that belt further.
To that end, everyone is working to lobby the White House in advance of the May 18th deadline. Several members of the industry, like Subaru of America President Tom Doll, have taken to Washington to try and get the message across that the tariff could be harmful. Others are writing letters to anyone who will listen. Advocacy groups and individual manufacturers are hoping their words will make enough of an impact to turn the tide. Even if they don’t agree on what to sell, to whom and at what price, it’s become clear that everyone in the industry does not want the 25% tariff to go through.
