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How The Trump Auto Tariffs Will Shake the Industry

A look at the President’s proposed 25% car tariff on imported vehicles and car parts

Updated on March 9, 2019

Donald Trump has recently made big news with his proposed 25 percent tariff on all imported cars and car parts in the hopes of securing fairer trading terms for the U.S. with foreign parties.

While many would assume this tariff would only impact those interested in purchasing vehicles from foreign manufacturers (regular auto imports), even domestic giants like Ford and GM use a large percentage of imported auto parts in their vehicles, particularly steel and aluminum components that are built overseas.

Apart from vehicles costing more, the proposed tariff is also a huge threat to hundreds of thousands of U.S. dealership and manufacturing jobs in the auto industry as limited production leads to limited profits and limited job availability, according to experts from the Center for Automotive Research. Though these tariffs are hardly a threat to National Security, there’s no denying that they will significantly affect the US auto industry.

Read on to find out how the Trump auto tariffs will affect some of the best-selling vehicles on the market.

Donald Trump proposes 25% automotive tariff that could hike the price of most vehicles on the market

(Data gathered from the NHTSA, U.S. News and World Report, and Kelley Blue Book)

 

10. Honda Civic

The Honda Civic sold 377,286 units in 2017, and is ranked #3 among compact cars on the market. According to KBB, a new Honda Civic could run you anywhere from $19,835 – $27,695. A standard 4-door Civic is made from 60% domestic parts, while 20% of its parts come from Japan. More notably, however, is the 5-door Civic hatchback, which is only 15% domestic. The average price of the hatchback is about $23,300, which means the proposed car tariff could see a spike in 5-door models of about $2,600.

 

9. Honda CR-V

The Honda CR-V sold 377,895 units in 2017 and is the #1 ranked vehicle among compact SUVs, which is one of the most rapidly growing markets in the auto industry. KBB says a new CR-V will cost between $25,245 – $35,145. The CR-V is actually 65% domestic, so despite the higher price tag, this vehicle is only going to see about a $1,000 bump in price if they impose tariffs.

 

8. Ford Escape

The Ford Escape is ranked #2 among compact SUVs and sold 308,296 units in 2017. With an MSRP ranging from $24,935 – $34,485 and a domestic parts volume of 60%, the Escape manages to miss a good chunk of the proposed automotive tariff’s hit. Still, buyers could expect prices to rise in excess of $1,000 if the trade war is further escalated.

 

7. Ford F-150

It might come as a surprise to some that arguably the most American truck in existence is actually only 65% American. With 896,764 units sold across the entire F-Series in 2017, Ford trucks make up an absolutely massive share of the market both domestically and abroad. With a huge price range of $35,640 – $65,670, it should come as no surprise that despite being mostly manufactured in the U.S., the F-Series pickups could be seeing some rather substantial price jumps if the automotive tariff goes into effect.

 

6. Toyota Corolla

The Toyota Corolla sold 308,695 units in 2017 and despite seemingly falling out of grace as the #15 ranked compact car, it is still one of the most widely known names on the market. With a rather small price gap of $19,520 – $23,700 and a domestically-produced parts percentage of 60%, the Corolla sees a price jump of around $1,200. Even more shockingly, however, is the Corolla iM, which is entirely imported and uses 0% domestic parts. Even a base model could fetch a price of $4,700 more than the current MSRP should Trump’s tariff go into effect.

 

5. Honda Accord

The Honda Accord has been winning accolades left and right in the past few years and is widely regarded as one of the best cars on the market. Ranked #2 in midsize cars by USN and having sold 322,655 units in 2017, the Accord is no small fish on the market. Produced 60% in the U.S., the Accord doesn’t have much to worry about, but with a higher price tag of $24,465 – $36,695, the Accord may take more of a hit than expected. In fact, the hikes could amount to as much as $3,000 depending on the chosen trim and options.

 

4. Toyota Camry

The Toyota Camry is the most well-known name in the automotive industry aside from the Volkswagen Beetle, and is the #1 mid-size car on the market. It sold 387,081 units stateside in 2017 while a new model could run you anywhere between $24,565 – $36,020. Produced using 30% foreign parts, the price hike could see an increase of $2,000+ dollars for higher-end variants.

 

3. RAM 1500

The RAM 1500 sold only 500,723 units in 2017, it’s actually ranked #1 in full-sized trucks compared to the F-150’s #2. The RAM is produced about 70% stateside, so despite the F150 seeming like the more American of the two, this is actually factually incorrect. With a rather large price range of $34,690 – $58,590, the RAM 1500 could see price hikes upwards of $3,400.

 

2. Nissan Rogue

The Nissan Rogue has seemingly taken the compact SUV market by storm despite being ranked #10 in the segment. With 403,465 units sold in 2017, it’s one of the best-selling models out there. Unfortunately, the Rogue is produced about 55% outside of the U.S., giving it one of the highest potential tax margins of the crossover market.

 

1. Toyota RAV4

Of course, everyone knows the Toyota RAV4. Toyota’s most iconic crossover sold 407,594 units in 2017 and is ranked #12 in compact SUVs. Ranging from $25,705 – $37,445 and with a domestic percentage of just 35%, the RAV4 takes one of the biggest hits of the cars commonly sold in the industry with a potential price spike of upwards of $4,700.

While some of these cars are going to see huge jumps in price if the new automobile tariff actually goes into effect, they’re essentially nothing compared to the likes of the high-end luxury car market which is almost entirely imported across the board. Most German luxury vehicles, and other products from the European Union, are produced entirely in foreign markets and imported to the U.S. which means that their entire MSRP is taxable under the new tariff.

This change has the potential to dramatically shift the global and U.S. automotive market in a profound way, so if you’re going to buy a car, you’d better get to shopping before prices skyrocket, though the commerce department is expected to release a more detailed report of what to actually expect in the near future, to help you make a better decision. While the cars listed above have significant price rises, we’ve also put together a short list of vehicles that might disappear altogether in the USA.

If The Trump Tariff Plan Goes Ahead, These Cars May Disappear

If large import tariffs of up to 35% (source ) force companies to build and assemble here in the U.S. rather than overseas, there are a fair few models that may not survive. After looking through the we can see what percentage of existing car models were actually made in America. This index takes into account multiple processes that go into making an automobile from R&D to manufacturing. In essence it shows how much of each vehicle is from the U.S.A. Additionally, we perused through manufacturer released sales data to see which vehicles were already having a hard time. With these two metrics in mind, let’s speculate which vehicles may get cut if President Donald Trump and his finance committee follows through with his import rate hike.

Mitsubishi Outlander

2017 Mitsubishi Outlander GT

For the last several years Mitsubishi sales in the U.S. have slid considerably. There were a few times in recent years where some experts wondered why Mitsubishi was even still trying to make it in the states. The good news for Mitsubishi is that 2016 sales rose 1.6% over 2015 and nearly every vehicle performed better year over year; except the Mitsubishi Outlander (source ). That’s not to say Mitsubishi will get rid of the car. That would be highly doubtful…IF everything else stayed the same. Add in some extreme import tariffs thanks to the Trump Administration, Mitsubishi would likely scrap it especially since only 1% of it comes for the U.S. In fact, if the tariffs were much higher at all, Mitsubishi could pull out of the United States all together.

Alfa Romeo 4C

2016 Alfa Romeo 4C

Fiat Chrysler Automotive as a whole hasn’t been doing so well the last few years. One of their only brands making headway year over year has been Jeep. And while the marketing campaigns and cars offered by Alfa Romeo are impressive, the abysmal sales of the entire Alfa brand are taking a toll on the parent company FCA. The 4C, in particular may be a phenomenal sports car but the brand’s return to America has been met with skepticism. Americans seem to look at Alfa’s premium price tag and the idea that the cars are unreliable. While the 4C isn’t on the Kogod index, we know it’s made in Italy.

In 2015 Alfa was able to sell 670 4Cs, but in 2016 that dropped to only 492 (source ). For those not wanting to do the math, that’s a 26.5% sales drop year over year and that’s never impressed anyone. While Alfa hopes the new Stelvio (no offense, but I think that’s a terrible name) SUV will bring the brand to glory. Personally, I don’t think it will help especially since it’s Maserati brother just had a big recall. Add on top of that potential huge import taxes and the 4C will be gone. In fact, Alfa Romeo would likely depart the U.S. again.

 

Fiat 500 and 500L

2017 Fiat 500c

Unfortunately, I have to pick on FCA here a bit. While the initial sales of the tiny Fiat 500 did well in the U.S. it seems the love for the car’s “cute” personality and styling has seemed to wane drastically. As a whole, the company has fallen to just 33,777 unit sales in 2016 which is a dramatic 24% decline over 2015 numbers (source ). While the new 124 Spyder turns heads and the larger compact SUV 500X has increased in sales, both the 500 and 500L seem to be in cardiac arrest (38 and 60% decline respectively).

2017 Fiat 500L Lounge and 2017 Fiat 500L Trekking

The most likely reason for this is the lower oil prices. With gas being considerably cheaper than when Fiat came back to the U.S. buyers are reaching for the larger gas guzzlers other companies offer. Additionally, the 500 is only 29.5% American while the 500L is only 6%. Factor in Trump’s potential heavy import penalties and the 500, 500L and possibly Fiat as a whole could exit the U.S.

 

Ford Fiesta

2016 Ford Fiesta

Here is a bit of an oddball on the list. I’m sure most of us have heard Ford’s plans to scrap their proposed plant in Mexico and invest money in their Flat Rock plant instead. According to Ford though, this had nothing to do with the Trump presidency. Regardless, Ford does still have a minor problem on its hands; falling sales of the Fiesta. Year over Year, the Fiesta has fallen 24.3% (source Ford). Like the Fiats listed above, this is likely due to the lower gas prices and more people buying large SUVs and so forth. Nevertheless, it’s never a good sign to see a car’s sales drop nearly a quarter. If Trump goes through with his plans to heavily tax imports to try to get more products made here in the states, the Fiesta could be a victim. After all, according to the Kogod index, only 15.5% of the car is produced domestically. Then again, if Ford’s investment into its Michigan plan picks this number up higher it could very well stay.

 

Nissan GT-R

Nissan GT-R

This would be borderline heresy for car guys wouldn’t it? Nissan’s flagship sports car…freakin’ Godzilla being taken out of the public eye in the U.S.!?! Well just remember, this list is all opinion and speculation so nothing is set in stone. That being said, one of the biggest sales disappointments for Nissan in an otherwise great year in the states has been the GT-R. According to their numbers, sales for the GT-R are down 36.8% in 2016 compared to 2015 (source ). Granted, this is a rather low production car to begin with so any sales drop is going to affect the overall percent. But let’s take a further look at the GT-R. While there have been numerous special editions and light upgrades to styling and performance, the car has been largely unchanged since its debut in 2007. Combine that with ever increasing prices, the car seems to be turning off buyers. In addition, the Kogod index says only 1% of the car can be attributed to the United States. If Trump made any increase on imports the beloved GT-R could be banished from American shores.

 

Audi A5

2017 Audi A5

While the Audi A5 may be a good looking two seater with multiple engine options (S5/RS5), the car may be in trouble in the near future. Besides the fact Kogod marks all of the Audi 5 series vehicles at only 1.5% United States backed, sales have declined over the last several years. For example, 2016 saw a 35.4% decline over 2015 which in turn had a 22.2% decline over 2014 which had an 11% decline over 2013 (source ). Needless to say, there probably aren’t many companies that like seeing a 3 year progressive decline in sales. Tack on the larger VW Group’s dieselgate and it’s easy to see how the A5 could land on the chopping block for the U.S. Again, if Trump is able to pass higher import tariffs for manufacturers, would Audi really keep it around?

 

Mercedes SLC/SLK

2017 Mercedes SLC/SLK

It seems every company has their black sheep when it comes to U.S. sales. For Mercedes (besides SMART), that would be the SLC/K. Year over year for 2016 it seems the sales dropped 18.8% to 3,397 units sold (source ). Again, this wouldn’t be much of a problem for most manufacturers. Even at a lower sales volume, the SLC helps Mercedes have a larger, more complete lineup designed for any budget. Unfortunately, this article is about what cars could potentially leave the states if President Trump enforces penalties on imports. And while most of Mercedes cars are made overseas and only receive 1% of anything from the U.S., with the SLC being the worst seller, I would guess it would be the one to get the axe.

 

BMW 6 Series

BMW 6 Series

I’m going to say this is highly unlikely to happen, but based on some of the facts in front of me maybe it’s plausible? BMW in general had a tougher year in North America, stating it had an overall decrease of 9.5% compared to 2015 (source ). Looking at their sales records, one of the worst performers year over year was the unfortunate 6 series. Honestly, in terms of looks, the 6 series is one of my favorite BMWs at the moment. The Grand Coupe is absolutely stunning and if I had any money at all, I would be driving one. Personal tastes aside, the brand reported a 51.5% decrease in sales for the 6 series from 2015. Now, one thing to keep in mind is that BMW will be unveiling a new 6 series sometime in the next year or two. Still though, with more than half the sales being taken away from one model, this can’t just be brushed off. Factor in potential import issues via Trump with a car that only has 3.5% U.S. blood and the 6 series could see a push. The Trump auto tariffs could hit this model very hard.

No one really knows exactly what President Trump will want to do or be able to pass. This list is just a preview of vehicles that could face larger issues if his initial statements and plans about raising import tariffs come true. Most, if not all of the cars listed are currently having sales issues already and may have general issues with the entire brand here in the U.S. Honestly, there is no crystal ball to see what will happen, but when declining sales are met with higher import or production costs, manufacturers are usually quick to respond. One thing is for sure though: politicians of any party or creed have made some massive assumptions that have backfired in the past, and President Trump is just as guilty of saying misleading things. To round up this article, we’ve decided to put together a list of the top misleading statement statements to come out of the President’s mouth!

An In-Depth Look At The Trump Auto Industry Half-Truths

Trump on Toyota Twitter

Trump on GM Twitter

Donald Trump certainly does his personal part to support the U.S. auto industry. His impressive fleet of more than 100 vehicles has included Cadillacs, Chevrolets and even, according to his campaign in 2015, a Tesla. And our new president has been using Caddy limos since the 1980s.

“I like the car I’m in now. It’s a Chevrolet Suburban. Made in the U.S.A.,” Trump told the Detroit News last year.

: multiple Rolls-Royces and Mercs, a Ferrari, and a ’97 Lamborghini Diablo he put up for sale in September.

Even before he began his White House ambitions, Trump had plenty to say (and tweet) regarding the state of the American industry under President Obama. Specifically, he’s blamed American automakers for planning to move U.S. production to Mexico and China, and the North American Free Trade Agreement (NAFTA, which was co-signed by fellow Republican president George H. W. Bush in 1994) for costing thousands of U.S. autoworkers their jobs.

Only not all of Trump’s statements about the American auto industry have been entirely accurate. Here are seven of his most “creative” automotive moments.

He Will Bring The U.S. Auto Industry “Roaring Back”

In a speech he made in Detroit on August 8, 2016 trumpeting his campaign’s economic policies, then-Republican presidential nominee Trump predicted “Detroit – the Motor City – will come roaring back. We will offer a new future, not the same old failed policies of the past.” Only American automakers (and dealers) had already “roared back” from the 2007-2008 financial crisis, with total U.S. auto sales hitting a record 17.5 million vehicles in 2015 and expected to remain close to this, or even grow, in the near future. Sure, many of the cars sold here are the products of foreign manufacturers, but U.S.-based car companies have also benefitted (and many of overseas automakers have stateside factories).

Source:

Annotated speech:

NAFTA Has Reduced The Number Of U.S. Autoworkers

In that same Motor City speech, Trump declared: “According to the Bureau of Labor Statistics, before NAFTA went into effect, there were 285,000 auto workers in Michigan. Today, that number is only 160,000.” While his numbers are roughly correct (in 1980, Michigan’s automaking and auto-parts plants employed around 280,000 compared with about 165,000 as of September 2016, according to the Associated Press), his wording is misleading in implying that this dramatic decrease is directly related to NAFTA. Indeed, in the six years immediately after NAFTA’s introduction, the number of Michigan autoworkers increased by some 40,000, before wilting due to increased factory automation, loss of market share, and the Great Recession (and then partially recovering after the federal bailouts). Furthermore, Trump omits that many auto jobs were simply relocated to other U.S. states while, under NAFTA, foreign automakers such as Honda, Nissan and Toyota also built new plants elsewhere in America.

Sources:

Annotated speech:

He Dissuaded Ford From Moving A Factory To Mexico

I worked hard with Bill Ford to keep the Lincoln plant in Kentucky. I owed it to the great State of Kentucky for their confidence in me!

— Donald J. Trump (@realDonaldTrump)

“I worked hard with Bill Ford to keep the Lincoln plant in Kentucky,” Trump tweeted on Nov. 17 last year, followed the next day with: “Just got a call from my friend Bill Ford, Chairman of Ford, who advised me that he will be keeping the Lincoln plant in Kentucky – no Mexico”. While it’s true that, according to company spokesperson Christin Baker, Ford was “encouraged the economic policies [Trump] will pursue will help improve U.S. competitiveness and make it possible to keep production of [the Lincoln MKC] here in the U.S.”, the specifics of Trump’s statements are flawed.

Trump on Ford Twitter

Trump on Ford Twitter

According to the Washington Post, Ford has never announced plans to move to Mexico either of its Kentucky plants, one of which produces the Lincoln MKC and Ford Escape, but rather had told Trump it would cancel a plan to shift production of a single model — the MKC — from Kentucky to Mexico. Furthermore, union leaders said the shift would not cost any Kentucky jobs, because Escape production would replace lost MKC production.

Sources:

Toyota Is Building A New Plant In Mexico To Build U.S.-bound Corollas

In a January 5 tweet, Trump exclaimed: “Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax.” Only, according to Business Insider, Toyota already builds the Corolla in the U.S. (in Mississippi), and the planned Mexico plant would shift Corolla production from Canada, not from the U.S. Also, Toyota’s new Mexican plant will be in Guanajuato, not Baja (where it has operated a factory since 2002). Furthermore, according to Business Insider’s Matthew DeBord, “Toyota can no longer afford to profitably expand Corolla production in the US. Building a new factory to assemble Corollas would likely mean tenuous, even speculative, new jobs that would be created to construct a vehicle whose sales, while considerable, are declining in the US relative to crossovers and SUVs”.

Sources:

Ford Is Moving Jobs From Michigan To Mexico

In the first Trump-Clinton presidential debate, on Sept. 26 last year, Trump stated: “Our jobs are fleeing the country. They’re going to Mexico. They’re going to many other countries. … Ford is leaving … thousands of jobs leaving Michigan.” Yet, according to the Associated Press (AP), Ford’s plans to shift its small-car production from Wayne, Michigan to Mexico would not cost any U.S. jobs, as the Wayne plant’s 3,700 employees would simply shift to building a new SUV and pickup truck instead. Trump contends that jobs could have been added in the U.S. if Ford had built its new small-car facility here rather than south of the border but, according to AP, Ford explained that it is almost impossible for it to make money on building small cars stateside.

Source:

Annotated debate:

GM Is Moving Jobs From The U.S. To Mexico

Trump on GM Twitter

Trump on GM Twitter

Continuing his “automotive jobs moving to Mexico” theme, on January 3 this year Trump tweeted: “General Motors is sending Mexican-made model of Chevy Cruze to US car dealers-tax free across border. Make in U.S.A. or pay big border tax!” But in a statement, GM fired back: “All Chevrolet Cruze sedans sold in the U.S. are built in GM’s assembly plant in Lordstown, Ohio. GM builds the Chevrolet Cruze hatchback for global markets in Mexico, with a small number sold in the U.S.” General Motors told CNBC it sold about 190,000 Cruzes in the U.S. in 2016, of which around 4,500 of those (equivalent to 2.4 percent) were made in Mexico.

Source:

Chrysler Is Sending All Jeep Manufacturing To China

Obama is a terrible negotiator. He bails out Chrysler and now Chrysler wants to send all Jeep manufacturing to China–and will!

— Donald J. Trump (@realDonaldTrump)

Trump’s questionable tweets about the auto industry are nothing new. Back when he was billed in the media as simply a “New York developer”, in November 2012, Trump tweeted: “Obama is a terrible negotiator. He bails out Chrysler and now Chrysler wants to send all Jeep manufacturing to China–and will!” Chrysler’s Vice President of Design at the time, Ralph Gilles, promptly replied, also on Twitter, “@realDonaldTrump you are full of shit!”, while his boss, CEO Sergio Marchionne, made a more considered response in a reassuring email to Chrysler employees a few days later. See, according to the Wall Street Journal, Trump was alluding to ads by then presidential contender Mitt Romney’s campaign which stated, accurately, that Chrysler was intending to build Jeeps in China – only Trump failed to mention that the company was also investing in expanding stateside Jeep production and planning to hire more workers in the process.

Source:

 

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