U.S. President Donald Trump went ahead and imposed a 25% tariff on auto imports. This momentous ruling will have major ramifications for America’s drivers and the future of the automotive industry. The White House estimates that these tariffs will bring in $100 billion per year. Although the Biden administration argues that it was meant to strengthen domestic manufacturing capacity, the tariffs will likely cause catastrophic shocks to the global supply chain.
Beginning April 3, new tariffs will be implemented. Consequently, car prices, repair costs, and insurance premiums will increase substantially. As they are currently crafted, the tariffs would raise the price of imported vehicles by hundreds or even thousands of dollars. In addition, they will worsen the burdens already being placed on the auto repair industry. This is particularly difficult for retailers such as Desiree Hill, who operates Crown’s Corner in Conyers, Georgia. According to Hill, the large majority of the cars she works on are foreign. These tariffs will make it more difficult to repair those vehicles.
“Unfortunately we don’t have a choice but to raise prices if they are raised on us,” – Desiree Hill, owner of Crown’s Corner.
The car industry is taking a heavy hit since it relies heavily on imported parts. Approximately 60 percent of replacement parts originate in countries like Mexico, Canada, and China. As such, they estimate that repair costs will increase as a result of the tariffs. These costs were already rising due to rising labor costs and the sophisticated technology necessary for next generation vehicles.
Skyler Chadwick with Cox Automotive reminds us to keep consumers front and center in these discussions.
“Many of these distributors will have no choice but to raise their list price.” – Edward Salamy, executive director of the Automotive Body Parts Association.
It is finally the consumers who will bear the brunt of these new price increases. Accordingly, personal auto insurance claims costs may increase by $7 billion to $24 billion annually. In fact, the American Property Casualty Insurance Association recently announced a 14% jump in average U.S. auto premiums for 2023. For 2024, they had already predicted another 12% increase. Looking out on the horizon, the Insurance Information Institute is predicting an additional 7% increase in 2025.
“You can’t walk into a dealership today and not see a United Nations of parts,” – Skyler Chadwick.
Jessica Caldwell from Edmunds warns of a “chain reaction for insurance,” noting that increased expenses will affect ownership costs beyond just purchasing.
Joshua Allrich, who runs Allrich Auto in Atlanta, shares these fears about increasing affordability costs.
“This is a total ownership cost increase, rather than just a purchase increase.” – Jessica Caldwell.
Beginning next week and over the next few weeks, tariffs will go up significantly. This regulatory leap forward prompts significant concern about its longer-term impact on consumers and industry participants. The international supply chain is under unprecedented strain. Consequently, industries may be forced to absorb these new costs or pass them on to consumers.
“It’s going to make things a lot more expensive,” – Joshua Allrich.
The tariffs will expand over the coming weeks, heightening concerns about their long-term implications for both consumers and industry stakeholders. As the global supply chain grapples with new challenges, businesses may find themselves forced to pass these additional costs onto consumers.
