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 economicfallout 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 severalyears 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.