Cnn
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President Donald Trump says he “doesn’t care” if the prices of cars increased because of his prices. They will do it – whether or not he wishes.
The Trump administration announced last week that it would impose a price of 25% Thursday morning on all cars imported from foreign countries, including Canada and Mexico. Finally, prices will also be placed on imported automotive parts.
Although the parts of the parts are intended for foreign manufacturing components, these direct debits could increase the cost to produce cars in American factories, as a significant percentage of the parts used to make the 10.2 million cars built in American factories each year are imported from other countries, according to federal government.
Industry experts believe that parts of parts alone could increase production costs from $ 3,000 to more than $ 12,000 per vehicle for cars assembled in American factories.
But it is not only the cost of prices could increase prices. It is the law of supply and demand.
Trump said he expects prices to possibly drop the prices of American cars while manufacturers transformed production in the United States. It could take years to accomplish with uncertain results. In the meantime, the basic economy weighs practically all purchases of American – foreign and domestic cars, new and even used. Expect that the prices of cars that are already close to the record levels become even higher once the prices have considerably upset the automotive market.
COX Automotive estimates that prices will reduce the production of North American cars from 10% to 20%. This represents approximately 1.5 million to 3 million less cars per year which exceeds assembly chains in Canada, Mexico and the United States, most of which should go to American dealers and exhibition halls.
It is also likely to disappear from the American market: perhaps millions of 3.7 million vehicles imported annually into Asia and factory auto Europeans which acquires a quarter of the American market for American cars, according to data from S&P Global Mobility.
And the economic law and the economic demand for longtime supply and demand means that to withdraw millions of cars from the supply will increase prices.
“Persons directly imported will be faced at a higher cost, which will lead to a shortage,” said Jeff Schuster, world vice-president of automotive research in GlobalData. “When there is a shortage, that brings these prices to rise.”
“Yes, the cost is a factor. But at the end of the day, the agreed price is the economy, supply and basic demand,” said Ivan Drury, director of information on Edmunds.com
This supply shortage, associated with higher production costs due to prices, is likely to quickly increase prices on American built car models, even if there are no immediate parts on the parts and the production cost of a car, an American factory does not increase immediately. The reduced competition of less imports should exert upward pressure for all prices of cars.
“The nature of a supply shock will increase prices,” said an automotive manager who spoke to CNN in the background last week.
In this case, history can be a guide. When the United States has returned prices to light trucks imported in the 1960s, the price of light American manufacturing trucks that were not subject to prices, such as microphones and vans, climbed much faster than the prices of other cars, according to Jonathan Smoke, chief economist of Cox Automotive.
“In the absence of this competition, the price of light trucks has accelerated,” he said.
Car manufacturers do not fix or necessarily benefit from higher car prices. Automobile dealers, which are independent companies, buy the wholesale cars of car manufacturers, then negotiate prices directly with car buyers. And a high increase in import costs and fewer cars available from dealerships, will quickly equal higher prices.
You don’t even need to come back over 50 years for proof. The United States has known this same supply and this same dynamic game request only a few years ago.
In 2021, while car manufacturers were trying to increase the production that had been reduced during the first year of the pandemic, a shortage of parts, including computer flea, reduced the production of cars and has increased prices sharply. Shortly after, almost all car buyers where to pay more than the price of stickers.
The average price jumped 17% for new vehicles between January and December 2021, according to data from Edmunds. The shortage of new vehicles, associated with higher prices, sent many new car buyers typical on the used automotive market. Thus, the price of used cars increased even faster, increasing 32% during the same period, even if none was affected by the shortage of flea.
This means that the price of used cars is expected by many experts to shoot higher with the prices of the new car, even if they are not directly affected by the prices. This could happen once again, used cars prices increasing even faster than the prices of the new car, said Smoke.
The increase in prices for new and used cars was a major engine of inflation in 2021 which contributed to the defeat of many Democrats in the 2024 elections.
But recent surveys show that the majority of voters do not think that Trump is in fact enough to reduce prices, and they are concerned about the impact of prices. Potential car buyers rushed to buy cars in the last week before the prices that take effect.
Last week, the Wall Street Journal reported that Trump had warned car manufacturers that his administration would not look favorably over the prices of the car following the upcoming car rates. According to the report, the remark shaken the car manufacturers. Companies fear that they will be imposed on punishment if the prices of the car increase.
Trump postponed the report during the weekend, telling NBC that it would be satisfied with price increases on imported cars, because he thinks that it would encourage car buyers to move to “American cars”.
“No, I never said that,” replied Trump when Kristen Welker of NBC questioned the report of the car manufacturers index not to increase prices. “I don’t care. I hope they will increase their prices, because if they do, people will buy American manufacturing cars. We have a lot. ”
After the interview, an assistant from the White House told NBC that Trump specifically referred to the price of foreign cars, not cars assembled in American factories.
Car manufacturers have not publicly commented on their price plans, or on the Wall Street Journal report on Trump warning them not to increase prices. But the main commercial group of the industry, the Alliance for Automotive Innovation, has issued a declaration warning that prices will increase consumer costs.
“Additional prices will increase costs on American consumers (and) reduce the total number of vehicles sold in the United States … All before any new manufacturing or new work is created in this country,” said John Bozzella, group CEO.
In private, car manufacturers say the same thing.
“There is a healthy debate to do on the way this cost could be shared between suppliers, (car manufacturers), dealers and end consumers,” a car director told CNN. The consumer added the executive: “will see a good part.”
