How Tariff Damage Spreads, Auto Edition

A case study in how the harm will ripple across the U.S. economy

WSJ editorial. Excerpts:

"The car makers could become collateral damage in an escalating trade war with China, and they will be hit with higher costs on everything from plastic for cup-holders to seat upholstery. Such costs will be layered on top of the President’s 25% steel and aluminum tariffs and 25% duties on auto parts and non-U.S. content of vehicle imports.

The Anderson Economic Group (AEG) estimated last week that the auto tariffs alone could increase the cost for smaller cars like the Honda Civic and VW Jetta by $2,500 to $4,500. Costs for larger vehicles that are more heavily affected by the tariffs like the Chevrolet Suburban, GMC Yukon and Cadillac Escalade could rise by $10,000 to $12,000."

"Mr. Trump’s first-term 25% steel and 10% aluminum tariffs are illustrative. Steel prices in the U.S. rose 20% in 2018 as domestic manufacturers took advantage of the tariffs to raise prices. Former Ford CEO James Hackett estimated that the tariffs reduced its annual profit by $1 billion. Ultimately, consumers and auto dealers ate the costs."

"While they increased car invoice prices charged to dealers, their affiliated lending arms also raised interest rates on loans, which especially hurt lower-income consumers who tend to finance a large share of their purchase cost."