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A coalition of auto insurance groups contends that if President Trump’s proposed 25% tariff on imported vehicles and components comes to pass, it will do more than just raise the price of virtually all new cars and trucks sold in the U.S., as has been previously reported.
Not only will the higher prices for imported parts mean that car and truck repairs will become more expensive, but their added value will likely spur a sharp increase in auto thefts. Older vehicles in particular are most often purloined and dissected into replacement components (water pumps, alternators, engine blocks, etc.) that are subsequently marketed on websites and/or sold to unscrupulous auto parts dealers.
As if that’s not enough, the one-two punch of costlier car parts and additional auto thefts can be expected to further take its toll on consumers' pocketbooks in terms of higher insurance premiums.
"The imposition of tariffs could likely lead to the filing of hundreds, if not thousands, of requests for rate increases by insurers with insurance regulators across all 50 states," according to a joint statement made to the U.S. Commerce Department by the American Insurance Association, National Association of Mutual Insurance Companies and Property Casualty Insurers Association of America.
The Auto Care Association, which represents auto-parts manufacturers, distributors, and retailers, contends that each U.S. household would pay more than $700 per year in increased ownership costs if the tariffs were enacted.
And it’s possible that higher parts prices would cause some motorists to postpone needed repairs, which could take a toll on a vehicle's fuel economy, further hitting consumers in the pocketbook, or adversely affect the environment if they’re emissions related. Some suggest delayed repairs could even place motorists, passengers and pedestrians in peril. "We are concerned that consumers waiting longer to replace their tires will result in increased traffic accidents and fatalities," say executives of Michelin North America, Cooper Tire & Rubber, and Sumitomo Rubber Industries in a statement made to the Commerce Department.
And this is all on top of higher car prices, which would both cause new-vehicle sales to tank and, in turn, boost the price of used models. As it is, with both interest rates and new-vehicle transaction prices on the rise, the industry is already facing an affordability crisis, and the 25% tariffs would probably push it over the proverbial cliff. A study conducted by the Center for Automotive Research (CAR) confirmed our computations in an earlier post that the cost of a vehicle built in the U.S. – which can include anywhere from 25%-80% imported content – would jump by about $2,270, with a typical imported model’s sticker price increasing by $6,875.
That would initiate a sales drop of 2 million new vehicles and a loss of nearly 750,000 jobs, according to the CAR. And that’s a conservative estimate compared to a report issued by the Peterson Institute for International Economics, which predicts that as many as 1 million to 1.2 million U.S. workers involved in the auto business could become unemployed if the tariffs were enacted.
Source: Forbes
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