Export Tariffs in Automotive- The Latest
Export Tariffs Impact on the Automotive Industry
On June 19, 2018, NADA’s president Peter Welch testified before the Department of Commerce and Defense about how new tariffs or quotas on imported automobiles and automobile parts would adversely impact consumers and dealers. Welch used the finding of a new study by the Center for Automotive Research (CAR) to evidence the burden on the automotive industry and consumers as a whole.
According to the CAR study, the “automotive demand will fall by between 493,600 to 2 million vehicles.” Lower demand means decreased employment “ranging from over 82,000 to nearly 750,000 jobs (lost) and a $6.4 billion to $62.2 billion decline in U.S. Gross Domestic Product (GDP).”
The effects of the new tariffs trickle down to the 17,000 new car dealerships that together “employ more than 1.1 million people, with average annual pay exceeding $57,000” (NADA, 2017). Per CAR, new vehicle dealership would lose between 28,800 to 117,500 jobs with a decline in total dealer revenues “between $16.3 billion and $66.5 billion.”
The insurance industry will also be impacted. The American Insurance Association, National Association of Mutual Insurance Companies and Property Casualty Insurers Association of America in comments jointly submitted to the Commerce Department stated that “hiking tariffs on imported auto parts … could increase costs by 2.7 percent, or $3.4 billion annually, for personal auto insurance premiums.” Some of the premium increases would be justified as “Insurers…might not be able to quickly get replacement parts for policyholders,” causing delays and increasing costs. Vehicle thefts may also increase as cars are sold for parts.
Finally, according to the Auto Care Association, the cost of car ownership is expected to rise by $700 per year. The Peterson Institute for International Economics estimates that the price of a new car could increase between $1,400 and $7,000. With this price increase, consumers may wait to purchase new cars or hold off on vehicle maintenance and repairs, which results in concerns over vehicle safety.
Prior to the July hearing, NADA filed exhaustive comments addressing the Department of Commerce’s investigation and as part of an industry Coalition, placed a letter to the president in the Wall Street Journal.
We will keep an eye on the effects of the tariffs and update this post as necessary.