Car Buyers May Face Sticker Shock from Trump’s Proposed Auto Tariffs

July 23, 2018 4:15 PM
Photo Credit: 
REUTERS/Mike Blake/File Photo

President Donald Trump is proposing a 25 percent tariff on all imported cars, trucks, and auto parts, under the presumption that these products pose a national security threat to the United States. A PIIE analysis finds this action would raise car prices for buyers between $1,400 and $7,000 for the top selling models across three categories—compact cars, compact SUVs/crossovers, and luxury SUVs/crossovers—assuming that automakers would pass along the extra cost to consumers, either at 66 or 100 percent of the import tax.[1] The change in price also accounts for the added production costs from Trump’s steel and aluminum tariffs, which amount to around $150 to $350 depending on the model.

Since all cars contain foreign content, even ones made in the United States, and consumers can choose among similar models across brands, average prices are expected to go up whether the car is imported or made in the United States. The US administration proposes not excluding any countries or auto parts from the tariffs. However, available data do not separate US and Canadian auto content, so the calculations below treat Canada as if it were exempt from tariffs, thus underestimating potential effects.

Average price increases expected from Trump’s tariffs
  Top five selling models
  Compact cars Compact SUVs/crossovers Luxury compact SUVs/crossovers
Current price

$16,852

$22,516

$35,020

Market share of top five models in category

57%

61%

49%

Foreign content (weighted by sales share)

51%

56%

84%

Estimated price increases from tariffs:

66 percent pass-through

$1,409

$2,092

$4,708

100 percent pass-through

$2,057

$3,066

$6,971

Sources: goodcarbadcar.net; National Highway Traffic Safety Administration; car-buying-strategies.com; Bloomberg Intelligence L.P.; Bloomberg Intelligence; Wall Street Journal.

Estimated price increases for top selling models

Compact Cars

Compact SUV comparison auto tariff chart

Luxury compact SUV comparison auto tariff chart

Note

1. Since US auto production relies heavily on imported parts that have no easy US-made substitute, the domestic producer will likely absorb the cost rather than the foreign producer.

Additional credits: Melina Kolb, Digital Communications Manager and William Melancon, Visual Designer

Add new comment