As the threat of a trade war with a number of auto-producing nations
looms, interest groups are sounding the alarm that U.S. employees and
consumers would be hurt first and foremost if the threatened 20 or 25
percent tariffs go into effect. Specifically, dealer groups are warning
that up to 2 million new-vehicle sales could be lost as prices for some
vehicles skyrocket, inevitably slowing down dealership traffic and
forcing layoffs of dealership staff, according to Automotive News.
As 9,600 import-branded dealerships in the U.S. employ 577,000 workers, the loss of business and layoffs would be massive by any measure.
The most vulnerable automakers would be the ones that do not have significant U.S. assembly lines. Mercedes-Benz, Volkswagen and BMW, which produce most of their SUVs and crossovers in the U.S. for the North American market, would be protected to some degree when it comes to any tariff scenario. Overall, German automakers produce just over half the cars they sell in the U.S. locally: 657,000 vehicles were exported from Germany to the U.S. last year, Reuters reported, compared with 804,000 that were produced here. Out of the German automakers, it would be Audi and Porsche facing the brunt of the tariffs since they don't have U.S. factories, while Mercedes-Benz and BMW would stand to see half of their lineups hit by tariffs -- sedans tend to be produced overseas.
But what about Japanese automakers?
Bloomberg reports Japanese automakers are in a better position to weather the tariffs since they produce roughly twice as many vehicles in the U.S. as they import. Japanese automakers started making vehicles in the U.S. earlier than the Germans, beginning in the 1980s. As Japanese sedan sales started to crowd out American sedans, local production was logical and essential. By 2017, they produced a combined 3.8 million cars here, up from 296,569 in 1985, as Bloomberg points out. In 2017 alone, Japanese automakers imported 1.7 million cars to the U.S. -- not an insignificant number -- but still less than half of the total number of cars they sold in the U.S.
Still, there is reason for worry as tariffs are expected to affect even the prices of cars produced by Japanese automakers here in the U.S.
"Tariffs would have a serious negative impact on the U.S. economy," the Japan Automobile Manufacturers Association said in a statement filed with U.S. Department of Commerce. "Tariffs on imported automobiles and automotive parts would have a serious negative impact on American families and jobs. Studies estimate that tariffs could increase the price of an imported $30,000 car by about $6,400 and cause up to 195,000 U.S. workers to lose their jobs. Tariff retaliation from trading partners could result in more than 600,000 U.S. jobs lost."
In urging the U.S. Department of Commerce and the Trump Administration to drop the threat of tariffs, JAMA also argued that the national security basis for the sanctions was nonexistent.
"Imported vehicles do not threaten U.S. national security," JAMA added. "The very basis of the Section 232 investigation is wrong. Imported vehicles increase the options for users’ diversified needs with regard to vehicle supply while creating new demand in the market, and they have contributed to the sustainable growth of the U.S. automobile industry, including vehicle dealerships, thereby strengthening the U.S. economy."
As several automakers have noted, even models produced in the U.S. could still see price increases. Toyota indicated last week that the popular Camry sedan, already produced in the U.S., could cost an extra $1,800 to manufacture in the U.S. if the threatened tariffs were to go into effect, Automotive News noted. That increase would likely be passed on to buyers.
"The tariffs on vehicle imports alone would increase the average price of cars generally, while diminishing consumer choice," JAMA said. "This represents harm to all U.S. consumers, including families and companies that use automobiles in or for their business operations. A study by the National Taxpayers Union Foundation estimates that prices for cars built in the United States could increase by an average of at least $1,262 per vehicle and the average price of imported cars would increase by $4,205 per vehicle. Yet another study estimates that the price of an imported $30,000 car would increase by about $6,400."
