President Donald Trump recently ordered a 25% tariff on imported
steel and a 10% tariff on imported aluminum. Canada and Mexico are exempt from
the new tariffs, as they continue negotiating changes to the North American
Free Trade Agreement (NAFTA) with the United States. The President has suggested
"other countries" could potentially negotiate their way out of the
tariffs by ensuring their trade actions do not harm U.S. security, but it is
unclear what assurances would allow them to negotiate an exemption.
The President has said the tariffs are necessary to protect
industries that have been harmed by “aggressive foreign trade practices."
Many lawmakers, both Democrat AND Republican, as well as many business
leaders, remain opposed to the tariffs, voicing concerns the move will spark a
trade war as other countries retaliate with tariffs on U.S. goods. The economic
fallout of the tariffs will also hurt consumers as prices rise on many products
that rely on imported steel and/or aluminum, including cars and trucks.
The tariffs could also cost the U.S. auto industry 45,000
jobs, according to a study by the Council on Foreign Relations. The study found
that that the 25% tariff on imported steel would increase the price of
U.S.-manufactured vehicles by an average of 1.3%, which would lead to an
estimated 4% drop in U.S. auto sales around the world. The study determined
that the number of jobs LOST in the
auto industry would be vastly higher than the number of jobs GAINED in the U.S. steel industry.
The National Automobile Dealers Association (NADA) and American
International Automobile Dealers Association (AIADA) has been speaking out
forcefully against the tariffs, arguing that they would result in an increase
in vehicle prices at a time when automotive sales are flattening, after several
years of record-setting purchases by consumers.
President Trump has also recently indicated he was prepared
to place new taxes, up to 25%, on vehicles imported from Europe, citing a trade
imbalance as a reason for this additional consideration. 2018 AIADA Chairman
Brad Strong recently stated that if the President follows through on his plan,
American consumers will end up paying an estimated $3.5 billion more per year
in new taxes on new vehicles ALONE. And this figure doesn’t account for potential
retaliatory tariffs from our trading partners.
The tariffs and potential tax on imported vehicles will be
painful to dealerships across the country. While auto manufacturers will take a
hit from the new tariffs, small businesses (like
local dealerships) will be hit the hardest, as consumers choose to wait on
new vehicle purchases until the resulting trade war runs its course.
NADA, AIADA and trade associations across the country will
continue voicing the industry’s opposition to these harmful protectionist
policies that will hurt franchised auto retailers AND consumers.