According to auto analysts, the new tariffs recently announced by the Trump administration will reduce carmaker profits, increase consumer prices, and reduce auto sales. Peter Nagle, senior analyst at HIS Markit noted that tariffs are taxes on consumption and costs are eventually passed down to the consumer. The same sentiment was voiced by Kristin Dziczek a VP at the Center for Automotive Research in Ann Arbor, Michigan. She added that sourcing parts from different suppliers in the short-term is difficult for the industry and, therefore, not an immediate option.
The latest import tariffs against Chinese origin goods will increase the cost of more than 100 auto parts by about 10 percent on items including tires, brake pads, engines, batteries, and body shop equipment. The tariff will increase to 25 percent by the end of the year.
The republican Michigan Governor Rick Snyder told CNBC recently at the World Economic Forum in Tianjin, that the “costs will be painful.”
Jon Gabrielsen, an automotive market economist, added concern as “vehicle sales in the US are already in slow decline.” He added that the 10 percent tariff will affect prices later in Q4 and the 25 percent will more seriously affect auto costs and prices starting in February 2019.
The Consumer Impact of Potential US Section 232 Tariffs and Quotas on Imported Automobiles and Automotive Parts commissioned by the US industry earlier this year found that a 25 percent tariffs would reduce auto sales, increase unemployment in the industry, affect dealerships, and increase prices on average by about $4,400 per vehicle.