The Trump administration's ongoing tariffs and trade war could make U.S. automakers less competitive in the global market, a spokeswoman for a Washington, D.C.-based trade association and lobbying group said during a recent interview.
"We believe the primary impact from tariffs on auto parts would be to increase the cost of producing a vehicle in the U.S.," Association of Global Automakers Communications Director Annemarie B. Pender told Washington, D.C. Business Daily. "No vehicle built in the U.S. today is made entirely with U.S.-produced auto parts, therefore the tariffs will raise the cost of every vehicle built in America."
And that would be bad for business at a time when U.S. auto exports have been surging, Pender said.
"Increasing the cost of U.S. auto production could lead to U.S.-made vehicles becoming less cost competitive in foreign markets, shrinking our export market," she said. "The U.S. has doubled its auto exports since NAFTA went into effect to 2 million units exported in 2017."
Association of Global Automakers Communications Director Annemarie B. Pender
Last year, the Trump administration slapped tariffs on various goods, including solar panels and washing machines, and the aluminum and steel used by auto manufacturers and their downstream suppliers. The Trump administration placed a 25 percent tariff on hundreds of categories of goods imported into the U.S. from China.
As the trade war has dragged on, global auto executives have urged the Trump administration to end the dispute, claiming the ever-shifting market is doing their industry no good and that auto tariffs could make things worse.
Earlier this month, Federal Reserve Chairman Jerome Powell, for months criticized by Trump, said low inflation is allowing the Fed to be "patient" as it mulls interest rates, despite concerns by investors over the ongoing trade war's growing economic impact.
While the tariffs might be causing some good for the Fed, the auto industry sees no benefit at all and the consumer looking to buy a new vehicle is going to feel it, too, Pender said.
"The average price of an imported vehicle will increase by $7,000, and a domestically produced vehicle will see a price increase of nearly $2,300," Pender said, citing Center for Automotive Research data. "These price increases could lead to a loss of 2 million annual sales."
There will be no uniform method for U.S. auto manufacturers, dealers and the industry in general adapt to tariffs and the trade war, Pender said.
"How automakers adapt to these tariffs is a case-by-case issue," she said. "Each automaker will have its own strategy."
There isn't much that consumers can do to adapt, Pender said.
"Consumers will face higher prices and fewer vehicle choices," she said.
And the industry will struggle as it tries to adapt, which could lead to job losses, Pender said.
"This is a case-by-case basis, however if auto production and sales decrease, auto parts and materials suppliers, dealers and companies that do business with them will suffer from the loss in purchases," she said. "Transportation and logistics services will be impacted by this decrease as well. The effect on communities from the loss in jobs within the auto sector could devastate regions of the country that now rely on the economic engines that these production facilities have become."