Trump's Foreign Car Tariff Means More Money Out of American Pockets

If the 25 percent tariff actually happens it will be felt by everyone.

MONEY
Newscast—AP

President Trump’s threats to impose auto tariffs could be getting closer to reality after he accused Canadian Prime Minister, Justin Trudeau, of “bad faith diplomacy" last week for Trudeau's comments during the G7 meeting in Quebec. The tariffs could apply to all countries, which include NAFTA partners Canada and Mexico, the two largest exporters of cars to the United States, and would affect American consumers and auto workers according to a report in Bloomberg.

The President tweeted last Saturday, “I have instructed our U.S. Reps not to endorse the Communique as we look at Tariffs on automobiles flooding the U.S. Market!” He called Trudeau “Very dishonest & weak.”

Although the proposed 25 percent tariff is only on foreign vehicles, American car buyers would absorb the costs. The report stated that American consumers would have to pay between $5,000 and $7,000 more for their vehicles on average which could reduce auto sales by 4 million to 5 million units. Other analysts suggest the impact on the economy would be less severe with a 1 million to 2 million auto sales reduction.

Bloomberg stated that Toyota, GM, FCA, Ford, and Honda produced a total of 2.2 million cars in Canada last year. Eighty-five percent of those vehicles were exported with the majority going to the U.S. market. The Honda Civic and Toyota RAV4 are the most popular models shipped to the U.S. from Canada.

“It’s not an economically feasible prospect to import vehicles to the U.S. market in a 25 percent tariff situation,” said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor, Michigan.

With a weakened economy and huge tariff on exports, car supplies from Canada would decrease. Jerry Dias, national president of Unifor, which represents Canadian autoworkers at GM, Ford and FCA stated that the tariffs may be difficult to sell Trump's manufacturing base since parts for Canadian-built vehicles come from the U.S.

“He’s going to have to explain to all those auto-parts workers why his strategy makes sense as they’re sitting on the unemployment line,” Dias said.

As of June 1, Canada imposed tariffs on U.S. products as part of its retaliation from last month's U.S.-imposed duties on imported steel and aluminum. Trudeau will likely do the same regarding these looming auto tariffs.

According to the Bloomberg report, the U.S. exports more vehicles to Canada than anywhere else in the world. 

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