President Donald Trump has taken executive action to impose tariffs on imports from Canada, China and Mexico. Jessica Caldwell, head of insights at Edmunds, joined TheStreet to discuss how these tariffs may impact the auto industry.
Related: Where you’ll feel the financial impact of Trump’s tariffs
Full Video Transcript Below:
CONWAY GITTENS: Now, you mentioned that while sales might slow of EVs here in the us, they’re strong in Europe and in Asia. So given that global trend toward EVs, how might what happens here in the us as impact. You know, our standing against foreign competitors.
JESSICA CALDWELL: Yeah I mean, I think that’s a really important point because we think about the foreign competitors, particularly the Chinese automakers, who have never necessarily challenged significantly in the us for this market, despite rumors for decades now. But the automakers, particularly here in Detroit, it’s like they really can’t take their foot off the accelerator because they will ultimately get passed by some of their global competition. And that’s a really scary thought because, you know, companies like general motors and ford, they’ve been trying to stay on the tip of this, you know, this wave of electrification. Because in the past, they have definitely been accused of and guilty of being behind the trend.
And that almost, you know, as we saw in 2008, led to some serious ramifications for those companies. So I think that it is it is challenging when your home market, maybe it seems a bit hard to gain momentum, but you look around the world and that’s not necessarily the case. And how are you going to be able to compete with Chinese automakers who are going so strongly in, you know, their market but also looking to export more and that’s, you know, going to be a tall order for particularly the Detroit automakers as we look to the next 10 to 20 years.
CONWAY GITTENS: And so sticking with this, this theme of competition, I’m wondering if we see this pullback in infrastructure and possibly this pullback in this federal tax credit. And then you put on top of that the tariff situation. How does that impact this whole supply and demand thing or will it at all, since so many foreign automakers already assemble their cars here in the U.S.?
JESSICA CALDWELL: It definitely, I think gets a bit tricky just because how far do the tariffs go if they start to go to parts? I mean, that’s a different story than if it is final assembly of where the vehicle is manufactured. If that is the case, then maybe the risks are not as bad because as you pointed out, a lot of the foreign automakers do already assembled vehicles here. But I think what probably is more daunting is the thought that all the parts coming in from, you know, different parts of the world Mexico, Taiwan, Asia, all of those will be tariffed because that, I mean, not only is that a logistical nightmare because you’re talking about so many parts coming from so many different places, and a lot of times parts are made in different parts of the world.
So how does that all work together? So from an administration standpoint, that is extremely tough. But then also adding costs. If you have elimination of a federal tax credit, plus you’re paying tariffs on all of these extra parts. There’s only so much that the consumer can absorb at this point in time, and especially again with cost of living increasing so much just in the past few years, interest rates continuing to be high despite the fact that they’re easing, but they’re still high from historical norms, it really makes a situation where it’s tough for consumers to support this new technology, even though if all parts are taxed, then all the vehicle prices will go up, so that can really change things.
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