Trump’s Auto Tariff Threats May Face Reality Checks

DETROIT – President-elect Donald Trump’s made-in-America mantra of automotive tariff threats will face a reality check when he takes office, says Sandy Schwartz, president of Cox Automotive.

Trump has threatened to slap hefty tariffs on the likes of General Motors, Ford and Toyota for making vehicles in Mexico and selling them in the U.S. His proclamations have left some automakers on edge and wondering what might befall them after Trump takes office Jan. 20.

Schwartz offers them some solace in his remarks at a Cox media event held in conjunction with the North American International Auto Show here. Cox owns several auto-services brands, including Autotrader, Kelley Blue Book and Manheim auctions.

The Cox program includes analysts’ comments on 2016 sales (awesome), 2017 prospects (potentially a good year, but not a record year), economic trends (job market stable, wages up) – and speculation about whether the incoming U.S. president will follow through on his tough tariff talk. 

“The reality is going to hit; you just can’t do all the things you say you are going to do,” Schwartz says of presidential power limitations. “(Trump) is not going to put 35% tariffs on General Motors. It’s not that easy.”

He adds: “You won’t see a seismic change in the auto industry because of Donald Trump’s proclivity to have cars made in the U.S. But let me say, it is a good thing to keep as many jobs in the U.S. as we can. I think everyone agrees with that.”

Other Cox representatives weigh in on the subject of how the impending Trump administration will affect the auto industry.

“A 35% tariff is not something that is going to be introduced in a Republican-controlled Congress,” says Jack Nerad of Kelley Blue Book. “It’s just not going to happen.”

But even the threat of presidential action can affect behavior, says Michelle Krebs, Autotrader’s senior analyst, pointing to Ford’s recent decision not to build a plant in Mexico. Ford’s Mexican operations had been a Trump campaign target.

“One of the unnerving things is that there could be unintended consequences that may not be in the best interest of consumers,” Krebs says, referring to higher sticker prices and curtailed product offerings.

Labor costs are higher in the U.S. than in Mexico where automakers primarily build cars with tight profit margins. Meanwhile, production of more profitable SUVs and pickup trucks mainly is in the U.S.

Trump also has expressed his displeasure with the North American Free Trade Agreement, saying it has cost jobs in the U.S. 

On that topic, Tom Webb, Cox’s chief economist, says, “Like most economists, I’m a strong believer in free trade, though there are some arguments whether all trade agreements are fair.

“But if you were to eliminate NAFTA, the repercussions would be tremendous for (automakers), affecting their very structure.”

Trump has used Twitter to express himself on assorted subjects, including his desire to see vehicles sold in the U.S. built in the U.S. His Twitter storms can cause industry consternation.  

But Schwartz says the new president "will discover you can’t govern through 25-word tweets.”

He adds: “Personally, I think things will settle down (after the inauguration). Let’s wait and see what’s happening in April.”

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