Pub. 4 Issue 4

27 Issue 4 2018 highest-ranked car made by a Detroit automaker is the Chevrolet Corvette, which placed seventh. About two-thirds of its parts and manufacturing are from the United States or Canada. The only automaker that builds all its American cars at a US plant is Tesla (TSLA). But even Tesla imports roughly half the parts it uses. All major automakers have plants in Mexico where they build some cars for the US market, so they would all have to pay a tariff on imported completed vehicles. But tariffs on parts would nearly double their estimated import cost: Tar- iffs on parts would cost automakers $35 billion, on top of $48 billion in tariffs on imported cars that are assembled out- side the United States, according to the American Automotive Policy Council, a lobbying group that represents the three Detroit automakers. American auto parts makers don't have capacity to build all the parts domestically that are currently im- ported. Most imported auto parts are made in Mexico and other low-wage countries. So the automakers will prob- ably pay the tariffs and pass along much of the cost. "Nobody wins in this tariff scenario. Nobody's jobs are saved," said Rebecca Lindland, analyst with Cox Automo- tive. "Everything is going to get more expensive." More expensive cars could mean fewer sales — a drop of 1 million to 2 mil- lion vehicles, according to the American Automotive Policy Council. That means US auto plants would probably produce fewer cars and cut jobs. Used cars could become more expen- sive, too. If people are forced out of the new-car market, used car demand — and prices —will rise, according to Lindland and Krebs. The exact increase in auto prices can't yet be known. Every car has a different mix of parts, and the exact amount of tariffs has not been announced. Auto- makers may absorb some of the cost to maintain sales. But estimates show vehicle costs will be significantly higher. The cost of a car with 35% imported parts would increase by $2,000 with a 25% tariff on parts, according to the American Automotive Policy Council. Toyota (TM) estimates the cost of the Camry, which is built in its plant in Kentucky and is the nation's best-selling sedan, would rise by $1,800 from the parts tariffs. And General Motors (GM) has warned tariffs could force the company to cut jobs at US plants due to an expected drop in sales associated with higher prices. 