US President Donald Trump’s new tariff hike is set to affect carmakers exporting to the US as well as some domestic players. Trump had announced a 25 percent hike in tariff for passenger vehicles that are coming into the country, which will be effective from April 2. As per government data, 39 models sold in the US are either imported from Canada or Mexico.
Auto tax to affect domestic players as well
The new tax structure will not only affect car models being imported from Canada and Mexico, but also the domestic players. Carmakers use a complex supply chain system — a gearbox unit may be assembled in the US and shipped to Mexico for final assembly before it comes back to the US.
With the new rule, experts say that cars can get expensive by several thousand dollars, which will indirectly affect sales. Experts also say that manufacturing costs may go up, anywhere between $4,000 to $12,000. The additional manufacturing costs will be transferred to end customers. Vehicle parts and finished vehicles are the most imported goods from Mexico and even if a vehicle is assembled in the US, import of spared and components could push the prices up.
According to analysts, domestic carmakers such as Tesla, Ford, and Rivian import the least components, while other popular brands sold in the US such as Mercedes-Benz, Mazda, and Volkswagen import the most.
