An essential element of the escalation of the trade conflict between the United States and other countries is the increase in the imports of cars. In February 2019, The United States announced a national security threat from imports of automotive products. As a result, The US Department of Commerce sent the president a report in which it was decided to increase tariffs on imports of cars to 25%. The new taxes cover imports of cars worth more than $ 200 billion. The changes in tariffs have affected the leading importers of vehicles in the United States, such as Canada, the European Union, Japan, and Mexico. The team’s job is to determine the most profitable car brand to buy in the face of rising prices.
The introduction of 25 percent tariffs on car imports in the United States hit buyers’ pockets. The influence of the price rise on consumers has led to an increase in demand for domestic-made cars. According to Bloomberg experts, the average increase in retail prices in dealerships is about $ 5,800. Dealers are forced to increase prices significantly, which leads to a drop in sales. The negative impact is felt by retail chains and every segment of the automotive industry. Twenty-five percent of duties on imports of cars apply to all imported vehicles. Therefore, the innovation hits European and Japanese automakers, whose cars are trendy in the United States.
After the introduction of the tariff, the price of most cars increased by several thousand dollars. At the same time, American brands were the least affected. Reuters reports that Tesla kept current prices, Ford raised the cost of cars by $ 282, and General Motors – by $995. Volvo rose in price by an average of $7.6 thousand, Volkswagen rose in price by $6.8 thousand, and most of all Jaguar and Land Rover added in price — the price increase for these cars will be at least $17 thousand.
There are several ways to avoid the tariff: first, companies can reduce costs. Then they will have cheaper labor than their competitors and more equipment capacity. Second, manufacturers who have a product category in their product portfolio that is consistently in high demand can avoid it. The profit from its sales covers the losses in the segment that is subject to tariffs. Car manufacturers will reduce the damage caused to the company by import tariffs if they develop their production facilities in the United States.
The increase in tariffs on imported cars will help reduce competition in the US car market. Duties on imported vehicles will significantly reduce their competitiveness and lead to high costs, which will benefit the competition. Due to Trump’s new tariffs, many automakers without local assembly will cut their model ranges in the United States, and some will leave the American market altogether. Thus, the slowdown in the development of the imported segment will significantly affect local cars’ cost and competitiveness for the better.
The presidential administration understood that introducing tariffs would meet with severe criticism from businesses. This is because American consumers also suffered from the high import duties at first. Some of the cars for the local market are currently imported from other countries. For example, Volkswagen has production in the United States but distributes specific factories to factories in different countries. Therefore, the company imports some of its products to the United States, such as cars from China. Bloomberg notes that the automotive industry in the United States was among the hardest hit industries due to the increased tariffs worth $ 20 billion. Moreover, it reflected China’s retaliatory tariffs on exports of assembled cars, which, according to Bloomberg, amount to $ 13 billion.