The Trump administration is holding off on imposing new tariffs on car imports as the government considers revisions to a report on the national security implications, according to a Bloomberg report.
President Donald Trump has threatened a 25 percent tax on imported cars and car parts that automakers and industry analysts have said would be costly to automakers and consumers.
The delay gives carmakers some “breathing room,” said Ivan Drury, Edmunds’ senior manager of industry analysis.
“Automakers will still need to plan for worst-case scenarios,” Drury said. “Being stuck in limbo will delay the solidification of future plans, which has its own financial impact, but certainly avoids the immediate and extremely costly effect that tariffs would impose.”
Experts estimate that consumers will pay $3,000 to $4,000 per car more as a result of the ongoing trade war, even for vehicles built in the U.S. because of the use of imported parts, said Kristin Dziczek, vice president of industry, labor & and economic at the Center for Automotive Research in Ann Arbor, Mich..
Cars built in Mexico and Canada will be largely exempt after the United States-Mexico-Canada Agreement is signed later month, Dziczek said.
The National Automobile Dealers Association has said a 25 percent tariff would boost the price of a U.S.-assembled vehicle by about $2,270, and for imported vehicles, the price would rise by $6,875 per vehicle. Experts say tariffs would reduce sales by 2 million per year.
Bloomberg quoted unnamed sources as saying Trump met with top trade advisers Tuesday to discuss a draft report on a Commerce Department investigation into the impact of automobile imports. The administration is not ready to act on tariffs, and the commerce report would be subject to changes, Bloomberg reported.
In May, the Commerce Department started its study of Section 232 of the Trade Expansion Act, which covers imports of auto parts and SUVs, vans and light trucks.
Commerce Secretary Wilbur Ross has until Feb. 17 to deliver his findings to Trump. The president then has 90 days to decide what to do, Dziczek said.
Other analysts say that even though it’s status quo for now, automakers will, “keep a close eye on the White House,” said Charlie Chesbrough, Cox Automotive senior economist.
Chesbrough said the impact of a 25 percent tariff on all imported vehicles and parts from outside of North America would have been “significantly negative to vehicle sales, vehicle profits and industry employment.”
“There are 30,000 parts in each vehicle, and with the global sourcing chain in the automotive industry, it is likely no vehicle, and thus no vehicle buyer, would be immune from the tariff tax,” Chesbrough said.
There is also no “natural constituency” in favor of these tariffs, Dziczek said.
Automakers have warned that their costs to build and sell new cars will increase. That’s because every car assembled in the U.S. contains a large percentage of foreign parts. Toyota has said the costs of its cars could rise by thousands of dollars. General Motors has said it would be forced to downsize and cut jobs.
Axios reported that Trump continues to push for tariffs despite advice to the contrary, in part because he believes the threat of tariffs has won trade concessions from European and Canadian negotiators.