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 economics at the Center for Automotive Research in Ann Arbor, Michigan.
Cars built in Mexico and Canada will be largely exempt after the United States-Mexico-Canada Agreement is signed, 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 anonymous sources as saying Trump met with his 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 further 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 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 rise. 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.
A spokeswoman for GM said the automaker is still waiting to assess the impact of Trump’s trade actions when it can study them in their entirety.
“These trade actions must be viewed holistically to determine the impact on our supply chain and operations,” GM spokeswoman Jeannine Ginivan said in an email. “Specific to 232, in principle, we do not believe the import of vehicles or auto parts undermines the national security posture of the United States.”
Fiat Chrysler had no comment on the latest development, a spokesman said. Ford did not reply to messages seeking comment.
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.
“It’s an important tool to pressure the talks with the three regions: Japan, the European Union and the United Kingdom: ‘Give us what we want in the trade agreement or else we’ll put 25 percent tariffs on you,’” Dziczek said.
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