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| Maybe a back-door way to subsidize Tesla? Honda is also positioned to benefit compared to their traditional competitors Toyota, Nissan and VW. |
A 25% tariff on a vehicle that is 50% imported parts will raise the cost-to-produce by about 5%.
Some of the prices of domestic content will rise as manufacturers start purchasing commodities like nuts-and-bolts and spark-plugs from domestic suppliers.
ERJ, having not lived through this sort thing as an adult (that I can remember), I am somewhat dispassionately interested in the outcome. My biggest concern would be replacement components, which (if word of mouth is to be believed) can be either very plentiful or almost non-extant.
ReplyDeleteWord-of-Mouth has it that Kia and Hyundai (being the newest, high volume marks in the US) has a thin-bench with regard to replacement parts.
DeleteThat makes them expensive to repair and in the event of an auto accident, more likely to be "totaled-out". The good news is that the usable parts from the totaled-out vehicles become available on the used-parts market. The bad news is that the high value when parted out makes them very desirable to car thieves which also bumps-up insurance costs.
We have a place in town that buys totaled auto's. You call and couple of clicks and they can tell you how many they have and the cost of each.
DeleteI’m hoping it will be a short term issue, Joe. I suspect Canada will cave once the realities of these tariffs kick in. If not… we’re going to the poor house. And you guys will have manufacturers beating down the door wanting to set up shop in the US. That in turn will probably mean pulling what they need for that from their Canadian operations… worsening the problem for us. Hopefully common sense will kick in before it all comes to that.
ReplyDeleteGlen, I am hoping the same.
DeleteIf, for example a ford/gm is 54% domestic content, does that include assembly labor cost? In other words, if 46 percent of the parts are acquired outside the country, what % of the retail price is that? That would give a better idea of what the cost increase to american consumers would be.
ReplyDeleteOK, I screwed that up. 0.46% imported parts * 0.25 (25 percent tariff) * 0.40 (40% of total cost is from the cost of parts) = 4.6% rise in the manufacturer's cost to produce the vehicle.
DeleteThis is what happened when 'outsourcing' was in vogue... sigh
ReplyDeleteAll tariffs are a win for the USA.
ReplyDeleteThink GDP - imports are no longer being bought, this decreases the trade imbalance with other countries. USA GDP goes up. All those $’s stay home, where they belong.
Free trade was always part of the globalist lie towards their one world government
Things will cost more for a while, but as people go back to real jobs, costs will go down.
"Free" trade isn't.
DeleteCountries like China have huge numbers of barriers-to-entry and they are ever-shifting. It is one of the ways that local officials enrich themselves. There are almost always "technology transfer" conditions.
Officials at the national level can play dumb, but they know. There are very few secrets in China.
This is really horrible news for Nissan. They are already a dead-man walking financially. There is no way they can absorb any of the costs nor can they afford the loss of volume raising prices will trigger.
It will also cause huge turmoil for VW. Unionized workers at VW consider full employment to be a birthright. That belief will be challenged and have huge repercussions for the German politicians.
China, Japan and Germany are going to be squeezed, hard.
Kinda hard these days to define "Foreign" cars, as some fords contain less domestic content that some Toyotas, Hondas, or Subarus....Even Harley Davisdon is less than half "American" parts.
ReplyDeleteExactly. My former car, a Hyundai, was made in Georgis, USA. My current Buick was made in China. In their slight defense, the Chinese make a quality car, I will say.
DeleteAco complicating factor is that a lot of components in vehicles are simply not manufactured anywhere in the US...and haven't been for many years. The same can be said for many other products. The US has slowly stopped making things and started making ideas over the past half century. That has made us depend on people who are in reality our enemy. Not a good thing.
ReplyDeleteReading about rebuilding Chicago after the Great Fire of 1871. There was a 25% tariff on lumber from Canada that became a secondary 'flashpoint'. The tariff issue in Canada and USA would be a lot less problematic if we didn't have income tax such as in 1871
ReplyDeleteWe have owned 5 Hyundai’s in our marriage. Great cars, great dealership service, durable and inexpensive to run.
ReplyDeleteI’d like Hyundai to locate some manufacturing here. The tariffs may lead to that.