As the auto industry absorbed news of 25% tariffs on vehicle and auto parts imports this spring, I quickly thought of the strong network of dealer associations across the country.
As I write this column after President Trump signed the executive order, it was impossible to know how trade policy may have developed, and the policy is still in almost daily flux, including a mid-May 90-day slashing of tariffs on imports from China. Well before the March order, the administration’s dizzying series of proclamations, reversals and adjustments had become challenging to keep up with for most observers of U.S. tariff developments.
Regardless of how it ultimately pans out, dealers can lean on their state and national trade groups to help them understand and adapt to changes, along with the effects tariffs may bring.
When news of the tariffs order broke, it seemed clear that Trump aims to bring auto manufacturing jobs back to the states by disincentivizing use of other countries’ plants and parts suppliers.
If he follows through with the tariffs and even makes them “permanent,” industry analysts expect them to raise new- and used-vehicle prices by at least 10%, in addition to bumping up repair, maintenance and insurance rates.
March new-vehicle sales seemed to foreshadow a consumer base pulling back further on demand due to expected higher prices in a shift that would arrest the gradual recovery from the pandemic. Sales for the month were brisk, and analysts said many of the shoppers were trying to squeeze in their big purchases before the tariffs took effect.
Many consumers had already been either delaying or taking advantage of any incentives they could find to afford new or used cars. Electric-vehicle leases were a popular way to save due to federal tax credits that exempt them from manufacturing restrictions, and Trump has said he wants to eliminate those.
Finance-and-insurance sales, if the tariffs play out as ordered in March, will become ever more important for dealers to shore up profits.
Still, many auto borrowers’ budgets were already stretched too thin. Loan amounts, delinquencies and consumers with monthly payments above $1,000 all increased in the fourth quarter. Interest rates remain high due to stubborn inflation that could worsen with automotive and other tariffs. And then there are vehicle prices.
Given the myriad challenges and complexities, it seems wise to lean on the dealer associations now as many dealerships did during the pandemic. Putting heads together often brings collective solutions to forge a clear path forward.
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