‘Gut Punch’ to Auto Industry as Tariffs Kick Off ‘Downward Cycle’

Trade War Spurs Senate Finance Committee Hearing on Economic Damage Caused by Tariffs

QUOTE FROM FORMER SENATE FINANCE COMMITTEE CHAIRMAN MAX BAUCUS: “Tariffs hurt every corner of the economy and the auto industry is a prime example of how much damage the trade war can inflict on workers, businesses and everyday Americans who will end up paying more for cars. The latest round of tariffs is a tax increase that could cost hundreds of thousands of American jobs and cause long-term damage, not just to the auto industry, but to manufacturing as a whole – and that’s just the beginning. Retailers, farmers, workers, and consumers will all pay a steep price unless the administration changes course soon.”

NEW TARIFFS WILL CAUSE A ‘DOWNWARD CYCLE’ AND HIGHER PRICES. “New tariffs imposed by President Donald Trump on auto parts from China will hit carmaker profits, cut sales and threaten to ‘start a downward cycle’ in the critical industry, analysts unanimously agree. …’It’s going to be felt by Americans, and it’s going to be a big deal,’ said Peter Nagle, senior analyst at IHS Markit.” (Phoebe Wall Howard, “New China Tariff List Creates Risk of ‘Downward Cycle’ for US Auto Industry,” USA Today, 9/18/18)

  • ‘THIS IS THE “MOTHER MAKE IT STOP” POINT FOR THE AUTO INDUSTRY.’ “‘This is definitely the “Mother, make it stop” point for the auto industry,’ said Jon Gabrielsen, a market economist who advises automakers and auto suppliers. … ‘Vehicle sales already are in slow decline. This will probably will be quite a gut punch when they are forced to raise prices.’ Automakers can produce cars for about a month before the costs associated with the 10 percent tariff take effect. By February, ‘people will feel it,’ Gabrielsen said.” (Phoebe Wall Howard, “New China Tariff List Creates Risk of ‘Downward Cycle’ for US Auto Industry,” USA Today, 9/18/18)

STUDY SAYS NEW TARIFFS WILL COST 715,000 JOBS. “The impact of President Donald Trump’s escalating tit-for-tat over tariffs is already being felt, say auto industry experts. New car prices are beginning to rise, and auto exports are dropping. But a new report warns that sales could plunge by as much as 2 million vehicles a year, resulting in the loss of up to 715,000 American jobs and a hit of as much as $62 billion to the U.S. GDP.” (Paul A. Eisenstein, “Tariffs Could Mean a 2M Drop in Car Sales and Cost 715,000 Jobs, Warns Auto Industry Group,” CNBC, 9/21/18)

AUTO INDUSTRY WARNS TARIFFS COULD LEAD TO A RECESSION. “The auto industry fears that President Donald Trump’s threats to place tariffs on vehicles coming into the U.S. could drive the economy into a recession, the head of the largest auto retailer in America said today. ‘Everyone in the automobile industry — doesn’t matter if you’re a retailer, a supplier or a manufacturer — is freaking out around tariffs on automobiles,’ Mike Jackson, chairman and chief executive officer of AutoNation Inc., said Wednesday on Bloomberg Television. ‘The price point is so big, we all know it would be extremely disruptive, extremely expensive to the industry and most likely knock the economy into some sort of recession because it’s so inflationary.’” (Keith Naughton, “Auto Industry is ‘Freaking Out’ Over the Prospect of Tariffs on Cars,” Bloomberg, 9/19/18)

CONSUMERS WILL PAY MORE FOR AUTO PURCHASES. “As President Donald Trump’s new tariffs targeting $200 billion worth of Chinese imports are set to take effect next week, analysts warned that car prices would increase for U.S. consumers.” (Jason Lemon, “U.S. Car Prices Set to Increase Due to Trump’s China Tariffs, Experts Warn,” Newsweek, 9/19/18)

“IT’S HARD TO READ A SILVER LINING.” “‘It’s hard to read a silver lining into this,’ Kristin Dziczek, vice president of the Industry, Labor & Economics Group at the Center for Automotive Research in Michigan told the paper. ‘Tariffs are taxes on American consumers. We’re going to sell fewer… It’s all going to cost more. These are not things producers can choose to not pass along. This hits profits. This means less reinvestment. It starts a downward cycle that isn’t good.’” (Jason Lemon, “U.S. Car Prices Set to Increase Due to Trump’s China Tariffs, Experts Warn,” Newsweek, 9/19/18)