Donald Trump is taking big decisions.
What was said about the auto tariffs. 7.8 millions of vehicles were imported and sold in the United States last year.
Now, I want you to imagine that if you had that same demand, you’re going to put a 25% tariff on 7.38 million vehicles.
Clearly, that is not going to happen. What’s going to happen once these tariffs go into effect is the automakers will respond in a couple of ways. One, they’re going to slow down production in foreign plants for vehicles that are imported here to the United States.
They’re going to also probably have to raise prices and cut incentives. That will probably happen fairly quickly. And the final decision they’ll have to make is how much capacity do they have to bring production back in into the United States? The president says, well, there are some places that only have 60% capacity. It’s not as simple as just flipping a switch. There’s tooling. There’s also making sure that the plant and the supply chain can adjust and bring production from a particular plant overseas back here. But there’s no doubt this is going to be a huge hit for the auto industry. One executive in the industry texted me earlier and he said, this is going to drive the auto industry, not the overall economy, strictly the auto industry into a recession.
So that’s what we’re seeing.
The automakers across the board fall. Phil I mean, GM is down 5% at this hour. Ford is down something like three. So Stellantis, even though it seemed like 25% on finish coming in, would have been actually viewed as as not as bad as expected.
To an extent it’s not as bad as expected. It also leaves leverage for the president if he’s not happy with negotiations with countries, that he could ultimately hit the parts suppliers as well. One quick note, Melissa. I get this question from a ton of people. They’re like, well, how quickly could General Motors or Ford? Ford, by the way, is building a plant in Tennessee. That’s the only new plant that is currently under construction. But how quickly could an automaker, any automaker, build a new plant like this one here in Savannah, Georgia? Even if you had site picked out and you said, do it right now, two and a half years to three and a half years, and that’s lightning speed.
A few people I talked to with when I brought this up, they laughed and they said, I’ve never seen an auto plant built in two and a half to three and a half years. But I guess if you you expressed everything, maybe you could get that to happen. So for the people who say, well, they’re going to bring all the production back here to the United States, you just don’t flip a switch and make it happen, right?
President Trump also spoke about potentially exploring the idea of making the interest paid on auto loans tax deductible. If you buy an American made auto fill, I mean, could that offset some of this pain?
It could. I listen to that. When I heard that, I sat there and I thought, that will be appealing to a number of people. It could. I listen to that. When I heard that, I sat there and I thought, that will be appealing to a number of people. On the flip side, if you have to raise the price and we don’t know how much the automakers will have to raise prices, if you have to raise the price $4,000, you know, now you’re getting into an average transaction price over 50. Right now it’s close to 49,000. Now you’re going up into 52, $53,000. It is an attractive thing to manage.
