Mike Colias
Appearances
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
And there are estimates that are much more than that for larger cars. So, yeah, I think the expectation is going to be borne by the consumer.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
It sure feels like that. And it comes at a time where there's already an affordability problem in the industry. I mean, cars are something like 30% more expensive. People are paying 30% more for cars today than they were, you know, just before the pandemic. That's going to exacerbate a problem that is already tough on a lot of American consumers and car dealers and companies.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
And I think that has people freaked because there was this idea that this was a negotiating tactic. This is never really going to happen. I mean, tariffs on Canada and Mexico for the auto industry, you know, that's like DEFCON 1, right? This could wipe out profits for companies big and small. So, yeah, people are freaked today.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
I mean, there is no industry that has more at stake than automotive. Of all of the trade that happens between Canada and Mexico, the car business accounts for nearly a quarter of that. About 23% of cars that are sold in the US are built in either Canada or Mexico.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
Half of the car parts that come into the country that are imported here to be put into cars, about half of that comes from either side of the border. That's $100 billion of stuff. And then beyond the car companies, you know, there are thousands of part suppliers.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
Well, I think most people think of it as cars that are assembled inside of the U.S. And, you know, most of the cars that get sold in the U.S. are built here. It's a small majority. But a lot of those cars, the guts of the car is imported. A lot of it from Mexico, a lot of it from Canada. So it can be U.S. built, U.S. made. But, you know, a lot of it's relying on foreign parts.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
The renegotiation that Trump did in his first term of NAFTA that produced what we call the USMCA now, I mean, it was really, you know, there were some incremental changes that required some costs and some investment and companies had to make more stuff in North America in order to bypass any tariffs. But it was, you know, one executive referred to it as a rebranding, right?
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
I think auto executives went into this feeling like cooler heads were gonna prevail in a way.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
Our colleagues at the Wall Street Journal did a very nice analysis just the other day about how it followed one part, a piston, a pretty basic component that crossed the border six times before it got into a car, right? It was raw aluminum in Michigan, and then it was shipped to Canada to make into a basic part, and then back to Michigan for machining, and then down to Mexico to be finished.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
And then it went to Wisconsin at one point, and then back to Michigan to be put in an engine. So like... We don't know exactly if in a case like that, and that's sort of the norm in the industry, we don't know if that's going to get hit every single time. But that's part of the sort of the freak out, right, is people don't know and they've got to assume the worst at this point.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
I think on the tariff piece, they felt like they've seen some of the rhetoric and bluster kind of become more manageable once it's put into policy. But then as soon as a week or two after the inauguration, he announced a 25% tariff on Mexico and Canada. I mean, that was just kind of worst case scenario. I mean, he wasn't talking about
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
And did auto executives try to negotiate with the Trump administration? Yeah. Yes, there's been an intense lobbying effort going on. You know, one big point they've made is like, look, you know, you can do this and it's going to hurt everybody in the industry, you know, GM and Ford and Nissan and Honda, but it's going to hurt the U.S.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
companies more because they have a more extensive footprint in North America. And there are imported cars coming from Japan and in Korea virtually tariff-free. And so this is going to create an unlevel playing field. It's going to help our competitors and it's going to hurt us.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
But I think the bottom line point that they've really been trying to make to the administration is like, this is going to have the opposite effect of what you think. Like, this is going to hurt our ability to invest in factories and create U.S. manufacturing jobs.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
I think that's generally the expectation. I mean, it's going to get passed on to the consumers. And, you know, you see a lot of different estimates. But I think the sort of sturdiest ones I've seen is if a car costs right now mid $40,000 is kind of the average that an American pays for a car, it's going to tack on 7%, 8% in inflation to that. So that's a $3,000 or more estimate.