No, Tariffs Are Not A Good Thing
At the time of writing this, early April, the Trump administration announced major tariff hikes on multiple countries, as well as a 25% tariff on imported vehicles. It is important to note the date because of the constant fluctuating decisions made by the current administration. This article could be out of date by the time it is published. Who knows?
The Federal Trade Commission (FTC) has strict requirements that need to be fulfilled before being able to put “Made in USA” on a product. Without getting into the nitty gritty, a product’s material must be sourced from the U.S., along with processing and final assembly conducted domestically. “Assembled in the USA” is a completely different category that does not follow these strict rules.
Today there are no vehicles that are 100% American made.
Some manufacturers have production or final assembly in the U.S., but by definition, there is no such thing as “Made in the USA.” Vehicles assembled in the U.S. rely on components that are sourced and imported from other countries, such as Japan, China and Mexico.
Tablet screens that are on dashboards are not made in the U.S. Much of the metal used to create parts for a vehicle are not made in the U.S. Plastic molding, bumpers, trim, carpeting, buttons, cloth, leather and so on, are not made in the U.S.
There might be some manufacturers with models that are the exception for certain components, but again, there is no such thing as a 100% USA-made vehicle. The globalized supply chain reinvented how vehicles are made decades ago.
Tariffs directly impact that supply chain because they raise the price of their imported goods. When a product is brought into the country, an import duty (tariff) is imposed by the U.S. government requiring the importer, individual or company to pay, and that increase is transferred to the consumer.
Consequently, brand new vehicles will go up in price.
Here is a rudimentary breakdown: suppose a brand new car assembled outside of the U.S. currently cost consumers $25,000, but it cost that manufacturer $24,000 to produce and sell. That is a $1,000 profit, but a new 25% tariff would mean it now costs that manufacturer roughly $30,000.
The company cannot continue to sell that car at $25,000 and take a loss of $5,000 so the price has to go up $6,000 to continue to net the profit of $1,000. Which means the consumer now has to pay $31,000. Even vehicles assembled in the U.S. require imported parts that will result in higher prices. Not to mention, auto repairs and servicing rely on imported parts as well.
These tariffs create price hikes that burden consumers and could force a mass economic disruption.
