Report warns of soaring vehicle prices, job losses

The average price of imported vehicles sold in the United States could jump by thousands of dollars if the Trump administration imposes tariffs under a worst-case scenario provided by the Center for Automotive Research.

The Michigan-based thinktank estimates U.S. consumers would see the average price of new imports rise by $6,875 US, if a 25 per cent tariff is applied, or up to $2,750 if a 10 per cent tariff is imposed to imports from all countries.

The impact on American consumers would be substantially less if Canada and Mexico — partners with the United States under the North American Free Trade Agreement — are exempted.

The centre estimates the average cost of imports sold in the United States would rise by $3,980 if a 25 per cent tariff is applied only to non-NAFTA countries and by $1,345 if a 10 per cent tariff is levied on only non-NAFTA imports.

A quota that limits the number of vehicle and parts imports to 80 per cent of 2017 levels would also be costly, pushing up the price by $6,610 if all countries are included or up $5,583 in Canada and Mexico are excluded.

The report was issued ahead of congressional hearings into the Trump administration’s threat of tariffs or quotas to protect its national security.

President Donald Trump’s strategy appears aimed at returning the auto supply chain back to the United States.

But the CAR study found U.S. auto production can’t quickly increase, taking at least a year to convert an under-utilized plant and on average two years to build a new assembly facility.

The U.S. economy would contract by between $6.4 billion and $62.2 billion, it said.

The centre estimates that American auto demand will fall by between 493,600 to two million vehicles, resulting in the loss of 82,000 to nearly 750,000 auto manufacturing jobs.

Figures from the U.S. government’s International Trade Administration show more than 70 per cent of U.S. exports last year were to Canada and Mexico, “so including these two trading partners in the trade action would be particularly harmful to U.S. automotive parts producers.”

The centre said the 17,000 new-vehicle dealerships in the United States could see revenues decline by between $16.3 billion and $66.5 billion.