Trade Briefing: CAR’s analysis of potential automobile & automotive parts trade actions shows higher prices for U.S. consumers and negative impacts for the U.S. economy

Potential tariffs and quotas would lead to lower U.S. light vehicle sales, total employment, and economic output

ANN ARBOR, Mich. – July 19, 2018 – The U.S. Department of Commerce is currently investigating whether U.S. automobiles and automotive parts constitute a national security threat under Section 232 of the Trade Expansion Act of 1962, as amended. In a new analysis, the Center for Automotive Research (CAR) finds that tariffs and quotas on automobile and parts imports could cause new car prices to increase by $4,400 on average – with the price of even U.S.-built vehicles climbing as much as $2,270 due to the current share of imported parts content. CAR estimates that imported vehicle prices could increase as much as $6,875.

Rather than help the U.S. automotive and parts industries, a 25 percent tariff on automotive and parts imports will lead to up to 2 million fewer U.S. light vehicle sales, 714,700 fewer U.S. jobs, and $59.2 billion lower U.S. economic output. U.S. new automobile dealerships could lose as many as 117,500 jobs and $66.5 billion in revenue.

“Tariffs and quotas on automobiles and automotive parts will not strengthen the U.S. economy or make U.S. automakers and suppliers more competitive in the global market,” said Carla Bailo, CAR’s CEO and President. “Prices will rise for U.S. consumers – even if they buy a U.S.-built vehicle – due to the share of imported parts content used in U.S. production.”

Kristin Dziczek, CAR Vice President of Industry, Labor, and Economics and one of the study’s authors, said, “Scenarios that include Canada and Mexico in the Section 232 tariffs yield the most negative results for the U.S. economy. Canada and Mexico represent 52 percent of U.S. vehicle imports, 53 percent of U.S. vehicle exports, 48 percent of U.S. parts imports, and 71 percent of U.S. parts exports.”

The U.S. automobile and automotive parts industry, mindful of the problem overcapacity caused in the early 2000s, will be cautious about expanding their production footprint in the United States to make up for the 8.3 million imported vehicles and $143 billion in parts imports to the United States in 2017.

This briefing was commissioned by the National Automobile Dealers Association (NADA).

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