What Does the New Tariff Mean for the Auto Industry?

If you've been paying attention to the news lately, then you'll no doubt have seen a ton of coverage on President Trump's plans to impose a 25 percent tariff on imported vehicles. But what, exactly, will that mean for the auto industry? Continue reading to find out!  

What Does This Mean?

To sum it up, new tariffs imposed by President Donald Trump on auto parts from China will hit carmaker profits, cut sales and threaten to start a downward cycle in the automotive industry.

A 10 percent tariff was applied to the U.S. in September; however, it will increase to 25 percent on Chinese goods starting January 1st.  

This leaves the question of how automakers plan to absorb these costs associated with the policy change. The most likely scenario is that car prices are going to increase.

Will Car Prices Rise?

The new tariff covers literally everything that goes into the construction of an automobile. This includes the smallest components and material inputs like the cords in tires, shafts, gears and bearings, all the way up to completed engines.

As a result, the National Automobile Dealers Association president and CEO, Peter Welch said industry analysis outlined a scenario where a 25 percent tariff would increase the price of the typical vehicle sold in the United States by about $4,400.

A Center for Automotive Research study commissioned by the National Automobile Dealers Association found a 25 percent tariff would result in:

• 2 million fewer new vehicles sold per year
• Total U.S. employment losses of nearly 714,700
• A loss of 117,500 of 1.1 million U.S. new-car dealership jobs, with the average franchised dealership losing seven jobs
• An increase in used car prices due to heightened demand and constricted supply
• Increases in the cost of vehicle maintenance and repair due to higher automotive parts prices

What Does This Mean for the Future?

In summary, if you want to purchase a new or used car, now is the time to do it. It is predicated that by February of 2019, cars that are on the market today will cost thousands of dollars more than their base price. As a result of increased demand, used cars will also increase in price.

Here at LeSueur Car Company, we want to be as transparent as possible and help you save money in the long run. We have many great quality used vehicles and will work with you to find the perfect match. Play it smart and purchase today!