The impending tariffs imposed by President Trump on Canada, Mexico, and China are poised to significantly raise vehicle costs for American consumers while simultaneously affecting the U.S. auto industry. Slated to take effect on Tuesday, these tariffs could lead to price increases of thousands of dollars on various automobiles, according to industry experts.
A 25% tariff on imports from Canada and Mexico, alongside a 10% tariff on Chinese goods, may cause car prices to soar by up to $12,200 for certain models, as reported by Anderson Economic Group (AEG), a consultancy based in Michigan. This price hike would impact a range of vehicles, including SUVs, compact cars, and electric vehicles, and come at a time when new car prices are already nearing a record high of $50,000, which could add further financial burden on consumers already grappling with inflation.
Patrick Anderson, CEO of AEG, noted in an interview with CBS MoneyWatch, “Our analysis shows the proposed tariffs would have a very big effect on North American assembled cars by multiple automakers.” He emphasized that these cost increases will likely be passed on to consumers, or manufacturers might halt production of certain models, potentially causing major disruptions in the industry.
Potential Vehicle Cost Increases
AEG’s analysis suggests that the additional costs for vehicles could range from $4,000 to $10,000, with electric vehicles that heavily depend on Chinese components seeing potential increases of up to $12,200. Here are the expected impacts on various vehicle categories:
- Battery-powered electric crossover vehicles: +$12,200
- Full-size SUV: $9,000
- Pickup truck: $8,000
- Small car: $6,200
These tariff-induced price hikes might deter consumers from purchasing new vehicles, leading them to either the used car market or foreign-made vehicles from countries like Japan for cost-effective alternatives. “Or, they could decide simply not to buy one at all,” Anderson remarked.
Given the complexity of automobile supply chains, where parts often cross borders multiple times, the new tariffs could lead to a surge in manufacturing costs. Gustavo Flores-Macias, a professor at Cornell University, pointed out that the automobile sector could face considerable challenges. He stated, “The automobile sector, in particular, is likely to see considerable negative consequences, not only because of the disruption of the supply chains that crisscross the three countries in the manufacturing process, but also because of the expected increase in the price of vehicles, which can dampen demand.”
Dan Hearsch from AlixPartners highlighted that automakers without imports from Canada or Mexico might initially benefit from the tariffs, as they won’t be subjected to the new cost increases. “For automakers that don’t import from Canada or Mexico, they’ll end up with a little bit of an advantage, because they won’t be hit with this brand-new tariff,” Hearsch explained.
Industry Reactions
Ford Motor Company CEO Jim Farley expressed concerns during an earnings call, warning that prolonged tariffs could severely impact the industry. He stated, “There is no question that tariffs at 25% level from Canada and Mexico, if they’re protracted, would have a huge impact on our industry with billions of dollars of industry profits wiped out and adverse effect on the U.S. jobs as well as the entire value system in our industry.” Farley also highlighted the inevitability of higher prices for customers.
Contrarily, President Trump maintained on social media that the tariffs would be beneficial for American industry, claiming they would drive “massive amounts of auto manufacturing” back to the U.S., specifically to Michigan.
Original Story at www.cbsnews.com