Trade Briefing: U.S. Consumer & Economic Impacts of U.S. Automotive Trade Policies

Authors:

Michael Schultz Kristin Dziczek Bernard Swiecki Yen Chen

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Produced By: Industry, Labor, & Economics Group

Categories: Economic Contribution Analysis, Employment, Forecasts, Trade

Full Description:

U.S. trade policy changes are projected to raise consumer prices for new and used vehicles and lower U.S. light vehicle sales, employment, and economic output. The Center for Automotive Research (CAR) estimates that the cumulative effect of current and potential U.S. trade actions on automobiles and auto parts could cause new car prices to rise by USD 2,750 on average. CAR estimates that the price of even U.S.-built vehicles could increase as much as USD 1,900 due to the current share of imported parts content, and imported vehicle prices could rise by as much as USD 3,700. The vast majority of the estimated price impacts are attributable to the potential auto and parts tariffs that the Administration is considering imposing under Section 232 of the Trade Expansion Act of 1962, as amended.

CAR’s analysis assumes that Canada, Mexico, and South Korea are exempt from potential Section 232 auto and based on the Korea-United States free trade agreement (KORUS) and exemptions from Section 232 auto and parts tariffs for Canada and Mexico that were agreed to in side letters to the USMCA that was signed in November 2018.

Rather than help the U.S. automotive and parts industries, the cumulative effect of the Section 232 steel and aluminum tariffs, Section 301 China tariffs, USMCA, and the potential 25 percent Section 232 tariff on imported autos and auto parts could lead to a 1.3 million drop in U.S. light vehicle sales, 366,900 fewer U.S. jobs, and $30.4 billion lower U.S. economic output (Gross Domestic Product). U.S. new automobile dealerships could lose as many as 77,000 jobs and $43.6 billion in revenue.

Used vehicle prices will also rise due to heightened demand and constricted supply, and higher automotive parts prices will drive up the price of vehicle maintenance and repair, so even holding on to an existing vehicle will become more expensive.

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