Proposed auto tariffs will hit US car buyers in the wallet
President Donald Trump’s proposal to impose tariffs on imported automobiles, SUVs, vans, trucks, and auto parts prompted warnings from automakers that those measures would reverse the industry’s recent job growth. An analysis by the Peterson Institute for International Economics (PIIE) echoed that view, calculating a five-percent drop in auto sector employment if trading partners retaliate on a hypothetical 25-percent tariff. Trump has stated a preference for that level of duty, although some news reports suggest that the expected levy now stands at 20 percent. The ultimate tariff rate will be based on the recommendation of an ongoing investigation by the office of the US Trade Representative, subject to presidential approval.
A recent PIIE report examined the effects of those tariffs on consumers. Auto tariffs would come on top of tariffs imposed on steel and aluminum imports, which automakers say raise auto production costs by one percent. The proposed auto tariffs, according to the report, will raise car prices significantly, “suppressing sales and pushing some buyers with modest incomes out of the new car market entirely.”
The average price of an entry-level compact car will increase between $1,409 and $2,057, according to PIIE, while the price of a new compact SUV/crossover—the most popular vehicle in the United States—will rise by $2,092 to $3,066. Upscale versions of the compact SUV/crossover will rise by $4,708 to $6,971, “because of higher imported foreign content, and hence higher taxes paid, for the typical luxury vehicle.”
Because of crossborder automobile manufacturing supply chains, the report also noted, “there are in fact no 100 percent ‘made in the USA’ cars.” Many foreign brand cars are assembled in the United States and some contain more US content than similar vehicles bearing Detroit brands.