They might be intended to stick, but I don’t think they will. Americans aren’t going to be happy paying $5K more for a new car, just to make a small number of autoworkers happy - and the retaliatory tariffs against our ag exports are going to be painful.
Plus, once the temporary exemption for Mexican/Canadian auto parts goes away (not as part of a USMCA re-negotiation - that’s part of the current tariff plan as soon as they revise their country-of-origin methodology to include parts as well as final vehicles), the economic case for U.S. production largely disappears for many of these vehicles. Unless the auto parts manufacturers start reshoring to the U.S. as well.
Americans have tolerated a stunning escalation in car prices over the last 20 years. Average new car today costs just barely under $50,000. The automakers themselves brag about their intent to push their brands 'upmarket" so they can take more money off their customers, and they brag about taking even more off their customers with “subscription fees”.
Graph of average light vehicle transaction price, over the last dozen years. Notice the escalation of price increases right after the plague, when automaker’s use the “supply chain disruption” and “shortage” excuses to gouge the living daylights out of their customers. With half the cars sold in the US each year, imported, those building cars here will be able to work that “shortage” narrative a second time.
As DrBob points out, it’s not that stunning. Especially since much of that price increase has also been the result of Americans buying “more car” - larger and more luxury vehicles, with better features and more capabilities.
That doesn’t at all translate into them being okay with paying $5K more from one year to another, and for the same car.
Yes - and IIRC, the American people got very unhappy the first time that happened. They were demanding solutions to those supply chain problems, and were livid about the inflation that resulted from it.
Now - imagine how the government would have reacted at the time if there was a simple concrete step that they could take that would completely eliminate the cause of those price hikes by undoing a policy that they had just enacted a few months prior and which everyone knew was the complete and total solution to the supply chain problem? If there was a metaphorical button they could press to make all that price pain go away? The political pressure to push that button would have been astronomical.
I have posted the links before. Automaker managements openly say they don’t care about volume or market share. They only care about taking more money off of each person who buys from them. Part of their strategy has been to simply stop offering lower priced models. The Chevy Spark, Sonic, Cruz, Malibu, Ford Fiesta, Focus, Fusion are all gone.
Here’s Farley saying he wants to get out of the 2 row SUV business, because it isn’t profitable enough to suit him.
So what? I don’t think their preferences will matter much in the political calculus. If the auto tariffs drive up the cost of the same cars by several thousands of dollars in a very short time frame, millions of voters are going to be very angry about that. The same way they were back when that happened after COVID. The difference this time will be that the government will have a very obvious, easy policy “button” that they can push to make all of that disappear nearly instantly.
Which is going to create an insane amount of political pressure to push that button and undo the tariffs.
It’s not. I mean, “tax cuts” is another different button that they might be able to push eventually, and which might generally provide some economic relief to voters. But there’s no direct, obvious linkage between an income tax cut and vehicle prices.
Meanwhile, the Administration could make the price increase on cars disappear near-instantaneously with a stroke of a pen. Most voters will know that the tariffs exist and that they are the reason that vehicle prices have risen, because everyone will be telling them that: manufacturers, Democrats, business leaders, and all the Congressbeings that are scared of being blamed for this.
The political pressure to push that button will be off the charts.
It’s the narrative. It’s a variation on the sales pitch for “supply side economics” that has worked on the Proles for forty years. Tell them they will benefit, and they’ll let you do anything to them. And the narrative is being propagated by a salesman/con-man of long standing. He knows how to get at people.
They’re not going to “adjust” until they know what they’re adjusting to. They might have a. Purple guys in a back room making plans, but that is different that building out loading docks, acquiring forklifts, retooling stamping presses, firing (in Mexico) and hiring (in the US) and all the rest that has to be done to move production. I’m obviously not saying it can’t be done, I’m saying it can’t be done with the snap of your fingers.
I think you don’t understand who minivan buyers are. If they wanted a Grand Cherokee they would have already bought one of those instead.
But we know that’s not true. Both parties constantly tell “the Proles” that they’re benefiting, and both parties are constantly being voted out of office (and then voted back in when the Proles stop believing the new party in power).
Voters in farm states know that an actual trade war hurts them. Voters around the country know they don’t like when prices go up. They don’t like it when the economy slows down and unemployment increases, either.
It will take some amount of time before any tax cuts could actually pass. Trump is pushing for his Big Beautiful Bill to get done quickly, but there’s still a lot of work to be done - and car prices are going to go up much more quickly than tax cuts could actually be put in place. And the slightest hiccup in the process (like, say, a bunch of House Republicans sticking with their claim they won’t vote for the Senate budget resolution that just got sent over) just increases that time gap.
So, yeah - if you’re FCA or any other automaker, you have to plug in a very high probability for those tariffs to go away (or get sharply reduced) into your decision-making calculations.
GM already snapped, April 3, the day after the auto tariffs were announced.
The Silverado is built in three plants: one in the US, one in Canada, and one in Mexico, so GM in the US will be cut off from 2/3rds of it’s production capacity. Unfortunately, this article does not give a timeline for when US production rate will be ramped up. Parts content on the Silverado is 37% US/Canadian and 37% Mexican, with a Mexican engine and US transmission. I would expect US production to come at the expense of the Mexican plant, so vendors only need to change the “ship to” to Indiana.
GM may add overtime days to the Fort Wayne production schedule, and is expected to increase employment at the facility via the hiring of “several hundred temporary workers.”
Nissan is also looking at increasing production of the Rogue in the US, instead of consolidating production in Japan.
The report comes from Japanese newspaper Nikkei. It says that instead of cutting Rogue production in the US, Nissan will cut production in Fukuoka. Nissan announced earlier this year that it planned to [cut production of the Rogue in Smyrna to just one shift, instead of sourcing the needed volume of its SUV from that Japanese plant.
Well … the last time the party in power changed, most of the tariffs remained. Could that happen again? Besides, the current tariff rates are purportedly pre-negotiation, so they will probably change over the next few weeks/months.
The other thing the automakers, and other manufacturers, have to keep in mind is that this time a “pro US manufacturing” guy was elected, and it could happen again once or twice over the next few decades, and usually you plan manufacturing plants to cover a number of decades due to their very high capex.
The last time it happened the tariffs were “reasonable”, and did not really impact or impede the trade between the nations. That, assuming the tariff rates stand, is unlikely to repeat.
But will the tariff rates stand? Who knows? Everybody on the team is yammering “there are gonna be great deals!” (as if “deals” is how you run a government). If they stand, then you surely don’t commit billions to an infrastructure buildout because you’re going to husband cash in the face of a deep recession. If they don’t stand then what’s the point? Either way it’s the uncertainty that matters.
Now perhaps some CEOs will guess “right”, and build a factory - and they will win if the tariffs hold over long enough to make that factory economically justifiable. Or lose if they are halfway through the project and the tariffs are rescinded and they have an uncompetitive plant.
To makes those kinds of decisions you need to have some certainty (even if you are wrong), and that seems unlikely given the ADHD toddler now in charge of policy - on a whim, and contrary to the intention of the policy that allows it.
A crowd-pleaser among the stories shared at a memorial service for Abner Mikva in 2016 was an anecdote about how his political career began. In 1948, he stopped by a Democratic Party ward office in Chicago and said he was there to volunteer for Illinois gubernatorial candidate Adlai Stevenson. “Who sent you?” asked a cigar-chewing ward heeler. “Nobody sent me,” Mikva replied. The ward guy’s response has become a classic line in Chicago: “We don’t want nobody nobody sent.”
