Automobile Tariffs


OVERVIEW

The Trump administration announced in late May that it was initiating an investigation that could result in a tariff of up to 25 percent on imported auto and auto parts. NADA fully appreciates the administration’s desire to address the loss of manufacturing jobs, the ballooning U.S. trade deficit and the uneven international trade playing field. But tariffs or quotas on autos poses a significant risk for dealerships and customers. Studies predict a tariff, if enacted broadly, would lead to higher new and used vehicle prices, a loss of dealership jobs, less choice and decreased competition, a loss of state and local taxes, a decline in fleet turnover, and more.

NADA Chairman Wes Lutz said the first job for dealers and our partners on the manufacturing and supply side is to educate the administration on the complexity and interconnectedness of the auto industry. "The notion that there are truly 'domestic' and 'international' brands simply isn’t true any longer. Manufacturers are globally integrated, and their supply chains routinely span international boundaries," he said.

But consumers would feel the most dramatic effect of broad import tariffs through "a combination of higher prices and fewer choices, as all imported vehicles and even U.S. built vehicles get dramatically more expensive, and some imported models are no longer offered for sale in the U.S. altogether," Lutz added.

NADA has been engaged on the issue. NADA President and CEO Peter Welch testified before the U.S. Department of Commerce in July to urge the administration to find ways to address “genuine trade concerns” without imposing auto tariffs that would only hurt American consumers and small businesses. Welch announced the findings of a new study by the Center for Automotive Research (CAR) showing dramatic increases in vehicle prices and significant economic consequences arising from new auto tariffs, including a possible 25% tariff on all imported vehicles and auto parts.

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KEY POINTS

● The president is seeking to address large trade imbalances and job losses in the U.S. manufacturing sector. For example:

➢  European tariffs on U.S. vehicles entering the European market are 10 percent, compared to U.S. tariffs of 2.5 percent on vehicles imported in the U.S.
➢  The U.S. trade deficit in 2017 totaled more than $568 billion, the highest in nearly 10 years.

●  U.S. auto manufacturing is highly integrated with global markets, with supply chains routinely spanning international boundaries. Imposing tariffs or quotas on imports may create a variety of unintended consequences.

➢  More than 54 percent of U.S. auto sales are of international nameplate vehicles (Wards Auto).
➢  However, 44 percent of international nameplate vehicles are assembled in the United States (Wards Auto and American Automotive Labeling Act Reports).
➢  The vehicles sold in the U.S. with the largest amount of domestic content for model year 2018 are Honda’s Odyssey and Ridgeline.
➢  Many domestic nameplates are actually manufactured abroad.

●  A broad increase in U.S. tariffs would raise prices and restrict choices for American consumers.

➢   A 25 percent tariff levied on cars and trucks assembled abroad could result in average price increases in the thousands of dollars.
➢  Consumer choice could be restricted if manufacturers decide to no longer import various models, as these manufacturers have marketing opportunities in other countries.
➢  A tariff on imported parts could significantly increase consumers’ costs of servicing and repairing vehicles.

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