The 25 per cent tariff on imported vehicles threatened by President Donald Trump could cost the U.S. car industry 1 million sales annually.
According to researcher LMC Automotive, if the government goes through with this plan, sales will fall by approximately 1 million units a year if automakers absorb at least half of the tax and pass the other half on to customers through higher prices. If car manufacturers pass the 25 per cent price hike directly on to consumers, sales could plummet by 2 million.
Bloomberg reports that a 25 per cent tariff on imported vehicles could lead consumers to do one of three things. For starters, those looking for a new car may instead opt to purchase a used vehicle. Secondly, some buyers would choose to purchase locally produced vehicles that are cheaper while others may simply postpone the purchase of a new car in the hope that the tariffs are only temporary.
Trump recently ordered an investigation into auto imports under Section 232 of the Trade Expansion Act of 1962 for potential trade penalties on national security grounds. Although some view the threats as a negotiating tactic, Trump’s recent tariffs on imported steel and aluminum shows that the leader is willing to adopt such drastic trade measures.
General Motors chief executive Mary Barra is providing input on the trade negotiations but didn’t say exactly how a 25 per cent tariff could affect the brand.
“We want to make sure that we maintain affordability in vehicles, because that’s so important — to continue to support the market that’s strong, that is supporting a lot of jobs.”