New study from the Center for Automotive Research shows tariffs leading to dramatic price increases and economic consequences

By Jared Allen, NADA Senior Director of Media Relations

WASHINGTON (July 19, 2018)—In testimony before the U.S. Department of Commerce, NADA President and CEO Peter Welch on Thursday urged the Trump Administration to find ways to address “genuine trade concerns” without imposing auto tariffs that would only hurt American consumers and small businesses.

“NADA recognizes the importance to the United States of leveling the trade playing field; eliminating unfair trade practices; and keeping America’s automotive industry strong,” Welch said during a Department of Commerce hearing to examine potential tariffs on automobiles and auto parts. “But a 25% tariff applied to all imports would hurt auto manufacturers, dealers, consumers and the economy as a whole. And the hardest hit would be our customers.”

As part of his testimony, Welch announced the findings of a new study by the Center for Automotive Research (CAR) – commissioned by NADA – showing dramatic increases in vehicle prices and significant economic consequences arising from new auto tariffs, including a possible 25% tariff on all imported vehicles and auto parts.

CAR found that under a 25% tariff on all imports and parts, “consumers would see the price of the typical vehicle sold in the United States rise by $4,400. Prices of U.S.‐assembled vehicles rise due to an increase in the cost of imported vehicle parts, adding $2,270 to the price. For the typical imported vehicle, these tariffs raise consumer prices by $6,875 per vehicle.”

The CAR study, “Consumer Impact of Potential U.S. Section 232 Tariffs and Quotas on Imported Automobiles & Automotive Parts,” also found that a 25% tariff would result in:

  • A 2-million-unit reduction in the total number of new vehicles sold.
  • Total U.S. employment losses of nearly 714,700, and GDP losses of $59.2 billion.
  • A loss of 117,500 of the 1.1 million U.S. new-car dealership jobs, with the average franchised dealership losing 7 jobs.
  • An increase in used car prices due to heightened demand and constricted supply.
  • Increases in the cost of vehicle maintenance and repair due to higher automotive parts prices, “so even holding on to an existing vehicle will become more expensive.”

Welch asked the Administration to “fully and carefully consider not only the new study we are submitting with my testimony, but all the data and analysis provided to the Department during this investigation.”

“The average price a new car already hovers around $35,000,” Welch explained. “According to Edmunds, in the past year interest rates on new car loans have risen 86 basis points and now average 5.82% – with more increases on the horizon. The average monthly car payment for a new vehicle now stands at $533 per month with an average loan term of 69 months. Our customers are already strapped to make those payments. A $4,400 tariff on top of that would increase new car payments to $611 per month (a $78 per month increase) – and put the purchase of a new car out of the reach of many Americans.”

“New tariffs or quotas would also reduce competition and consumer choice; increase the cost of used vehicles; and raise the cost of getting vehicles serviced and repaired,” he added. “As a nation, we can and should work together to address genuine trade concerns, without hurting American consumers and small businesses.”

Posted by NADA

National Automobile Dealers Association