While the role of tariffs enacted by President Donald Trump might be small when it comes to rising average transaction prices, the tariffs are costing car dealers money. At least according to one report.
In fact, according to Moody’s, as reported by Dealer Digest, dealers have missed out on $30 billion in profit thanks to the 25 percent tariff on all cars imported to the U.S.
As we know, automakers are either shifting production to build more cars in the U.S. or adjusting pricing strategies. The former approach isn’t a perfect response to tariffs, however — it takes time to implement. Not only that, but the tariffs also affect parts and some parts have to be sourced from overseas. So cars produced in the U.S. aren’t immune from the effects of tariffs — even Tesla, which builds models in the States, has been hit as tariffs increase the cost of materials needed for batteries.
According to Dealer Digest, tariffs had an impact of $11.7 billion as of mid year, but we also saw that sales seemed pretty healthy across the board in Q3. The Dealer Digest article came out earlier this month, and it may have been drafted before Q3 sales results were released.
It’s a confusing time right now — tariffs are having an impact, but it seems minimal so far, and sales seem mostly solid. Yet average transaction prices have cross a major threshold for the first time and are unlikely to come back down.
It’s likely still too early to gain a sense of the impact that Trump’s tariffs are having on sales and transaction prices.
Two other developments bear watching — a 25 percent tariff on medium-duty and heavy-duty trucks imported into the U.S. takes effect on November 1st, and as we noted this morning, Trump may provide some tariff relief to automakers, including foreign-based carmakers, who build cars in the U.S. The relief would apply to final assembly and perhaps engine production, as well.
Trump’s tariffs are an ongoing, ever-changing story, and we’ll keep checking in to see what’s happening to OEMs, dealers, and you the car buyer.
[Image: Scharfsinn/Shutterstock.com]
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