25% of President Donald Trump's tax of imported cars, light trucks and automatic parts are likely to increase prices at a time when many Americans are already trying to afford a new set of bikes. The tariffs will also force automotive society to re -evaluate what cars they are doing and where they are doing them.
Trump has been itching for years. In his first term, he said he automatically imports the threat to national security that gave him the power to store tariffs on them. He went forward on Wednesday and imposed fees. They are connected to midnight on April 3.
It is the latest in a number of Maneuvers of the Automotive Industry Trump in the first weeks back in the White House. Automatic companies also navigateReversing of fuel consumption standardsdickedDOWN EMISSION STANDARSAAHost Rollbacks of electric vehicles.
Some of the details of Trump Motor Show must still be developed.
For example, it is not clear whether the new automobile tariffs would put 25% of import taxes to the top to be collected next week for all goods from Canada and Mexico. This would mean that cars from Canada and Mexico could potentially face new tariffs of 50%.
So far, Trump's administration is liberated from car tariffs, light trucks and automatic parts that qualify for duty-free treatment on the basis of an agreement on the American Mexico-Canada, a regional trade treaty negotiated by the President five years ago. Trump intends to narrow this liberation to the content created in the United States, not in Canada or Mexico. However, this will require processes setting to determine what qualifies as an American-some of which could take weeks or months.
The White House also said that import tax would apply to “key” automatic parts, including engines, transmission, traction parts and electric components. And it could expand the tariffs to other automatic parts “if necessary”.
Here's what else to know:
Why are the automotive tariffs so demanding?
As automakers have expanded around the world have created complicated and efficient supply chains that bridged the Earth. For example, in North America, Mexico adds low wage work and makes smaller, cheaper cars and trucks, while Canada and the United States provide more qualified working and technological know-how.
The purpose of Trump's tariffs is to bring automatic production back to the United States. But it won't be easy.
It would take years to interrupt the acquisition of thousands of parts that are imported to the US and the uprooting of assembly operations.
“It contributes to the uncertainty faced by all car manufacturers because the supply chain of industry is by its very essence global and optimizes around moving components across the national borders where there have been free trade agreements in the past,” said John Paul MacDuffie, professor of management at the University of Pennsylvania.
Sam Fiorani, Analyst of AutoforeCast Solutions, notes that while European manufacturers of luxury vehicles and their buyers can afford some price adjustments, “they are companies like companies like companies ToyotaMazda, and Subaru who import a large percentage of their fleets that will be beating. ”
“Throwing tariffs on part of vehicles built in Mexico and Canada, which are not from the United States. General Motors, StellantisAnd Ford in the next few quarters cost them billions, ”he added.
Trump's tariffs – on which they insist on being permanent – forcing society to decide.
“It will result in forced companies to increase US content.”
And although Vanessa Miller, chairman of the Automobile Team in Foley & Lardner, recognizes that some companies will be able to turn operations to the US, others are too tied to factories in Mexico or elsewhere to move soon.
The automaker may have to stop producing some vehicles because they will not be profitable with established tariffs. The tariffs hit “Everyone forcing them to reconsider everything,” said Ivan Drury from the Edmunds car website. “That's about three or four years. We don't look at something you can just go.”
What does it mean for car buyers and new cars prices?
Beata Caraci and Andrew Foran of TD Economics estimate that tariffs could raise the average price of cars and light trucks in the United States – which last month reached more than $ 47,000 – up to $ 5,000 if cars hand over full price to consumers. This increase in prices could go higher – up to $ 10,000 – if Trump's administration uses a full car for cars made in Mexico and Canada.
Cars and their suppliers are only now recoveringyears of instabilitybrought from pandemic forced production stops, andSemiconductorand low supplies on the seller. That meantPrices were high sky, incentives were low and few shops were supposed to be.
At the top of the pandemic, consumers still bought vehicles at high prices. But the tariffs to a pile could eliminate new vehicles out of reach for many future buyers, especially due to growing hints potentiallywider inflation forwards throughout the economy.
“Almost immediately, consumers will see that their already expensive new vehicles cost hundreds to thousands of others and these prices will escalate even more when the stocks of many key vehicles will shrink,” Fiorani said. “Imagine that the price increases during the lack of a semiconductor and stretches it through every brand and manufacturer. The running effect will eliminate smaller business suppliers and send many unemployment workers.”
What about used cars?
By increasing the prices of new vehicles, tariffs are likely to send buyers to the market used. But with a limited inventory used, the influx of buyers could also rock the prices of used car. And an average of $ 25,000.
According to Edmunds, the rental or number of vehicle transactions that are leasing has been on average approximately 30% on average in the last 10 years.
However, the industry has seen low leasing-to-year levels-especially between May 2022 and January 2023. Fewer rented vehicles usually mean the less two-year or three-year-old vehicles that are launched using the car.
So there will probably be a lack of used cars, as well as more buyers will start shopping for them.
How did the industry react?
Governor Matt Blunt, President of the US Automotive Council, which represents the American car manufacturer, said that manufacturers supported Trump's efforts to strengthen domestic car production. However, he warned that “it is important for tariffs to perform in a way that avoids raising prices for consumers and that it maintains the competitiveness of the integrated North American automotive sector.
United United Auto Workers Trade Union applauded tariffs. “The end of the plant's bottom in the automotive industry begins with the determination of our broken trade agreements and the Trump administration has done history with today's actions,” said President UAW Shawn Fain in a statement. “These tariffs are the main step in the right direction for autoworkers and communities with blue collar communities across the country, and now it is on car products, from large three to Volkswagen And then, bring back good trade unions to the US ”
But Jennifer Safavian, President and CEO Cars Drive America, which represents international car manufacturers, condemned tariffs: “The tariffs stored today will improve the production and selling of cars in the United States, which will eventually lead to higher prices, less options for consumers and less US manufacturing sites”
This story was originally listed on Fortune.com
