As every car made in the U.S. has a high percentage of imported parts, the plan of Trump administration to implement an auto tariff could hit hard the country’s automaking industry. The higher costs of car production could mean that less vehicles will be built, thousands of employees will lose their jobs and the customers will have to pay significantly more to purchase American cars.
Every car made in the U.S. has foreign parts
According to U.S. regulators, who measured the percentage of parts from the U.S. and Canada in every domestic vehicle, there is no purely American car. This research reveals that two cars made by Honda are 75% American. When it comes to other cars, the proportion of imported parts is significantly higher. What this means is that every car producer in the U.S. will see a rise of costs of making a vehicle, due to the planned introduction of auto tariff.
The potential impact of an auto tariff
Once the tariffs on imported cars and parts are implemented, the whole industry will see a huge rise of costs. Since all biggest American car makers have plants in Mexico, building their vehicles for the domestic market, and at the same time they use imported parts for cars assembled in the U.S., their estimated import cost could even double.
The car producers could be left with no other choice but to raise the prices for their products. This in turn could mean fewer sales and eventually a decrease in car production and cuts of jobs at the plants.
According to some experts, the demand for used cars, which increased prices of new cars could create, would mean that they will become more expensive too.
At the moment, the exact amount of tariffs is not yet known, so we will have to wait longer to be able to predict the costs more precisely.