U.S. Dealers Expect Foreign Cars to Cost More if Auto Tariffs Enacted

A 25% tariff would increase the average price of an imported vehicle in the U.S. by $5,800, the auto industry’s main lobbying group says

Some car dealers are stockpiling popular imports such as SUVs in anticipation of a 25% tariff on imported cars. Shown, the Audi Q7 Quattro SUV on display at the New York Auto Show in March.
Some car dealers are stockpiling popular imports such as SUVs in anticipation of a 25% tariff on imported cars. Shown, the Audi Q7 Quattro SUV on display at the New York Auto Show in March. Photo: Lev Radin/Zuma Press By Adrienne Roberts

Car dealer David Rosenberg is taking President Donald Trump’s threat to impose a 25% tariff on imported cars seriously. Mr. Rosenberg’s New England dealerships have begun stockpiling foreign-built Mercedes-Benz and Audi sport-utility vehicles, based on worries that the tariff, if enacted, would make those vehicles more expensive to order from overseas. “There is no doubt the auto retail industry will be adversely affected,” Mr. Rosenberg said in an interview. “We’ll see price increases across the board and a lot of that will be passed on to the consumer. Sales will go down.” Not all dealers are taking such active measures. But car sellers and industry analysts say consumers should expect higher prices on auto imports if the proposed tariff were adopted. About 44% of all U.S.-sold cars were imported into the country last year. Dealers say many customers can’t afford more expensive vehicles. So auto retailers say they may curtail orders of vehicles built abroad, and some say they may focus on used cars with higher margins. The tariff, to a lesser extent, could also inflate prices for U.S.-built cars, because many of them use foreign-built car parts, car companies say. ClimbingAverage U.S. car prices have steadilyincreased, and tariffs could push them upfurther.Source: J.D. PowerNote: 2018 data are for the first half of the year. The average price of a car has been rising steadily for nearly a decade. Car makers and dealers say a 25% duty would only further increase costs, adding several thousand additional dollars to the sticker price of an imported vehicle. Mazda and Mitsubishi are expected to be hurt more than many other foreign brands because they are 100% reliant on imports to stock U.S. dealer lots and typically sell to price-sensitive buyers. The Alliance of Automobile Manufacturers, the auto industry’s chief lobbying group in Washington, estimates a 25% tariff would increase the average price of an imported vehicle by $5,800. For some top-selling imports, such as the Japanese-built Subaru Forester, Tim Kelly, owner of Kelly Subaru in Chattanooga, Tenn., estimates the tariff could add an extra $5,000 to the price tag, pushing the vehicle’s cost far higher than other SUVs that aren’t subject to the import duty. If that were the case, Mr. Kelly said, it wouldn’t be worth stocking the Forester, saying the increase would make it “wildly uncompetitive.” “Why not buy an Outback?” he added, which could end up being cheaper than the Forester if the tariff were imposed. The larger Subaru Outback is built in Lafayette, Ind.