Depending on the Automaker, a Border Tax Could Bump Sticker Prices by Thousands

Steph Willems
by Steph Willems

Automakers are waiting with bated breath to see where the pieces land once President Donald Trump complete’s the country’s trade revamp. One proposal would see a border tax of 20 percent placed on goods imported from other countries — a move that would impact the cost of manufacturing vehicles, and buying them.

Not every automaker would see a similar financial hit. Domestic manufacturers that use a high degree of parts built in the U.S., especially those that build few models in Mexico for delivery in the States, wouldn’t see much on an impact. For those that import most or all of their U.S. fleet from foreign factories, the cost per vehicle could be enormous. Customers, of course, would need to make up the difference.

While the tax proposal might come to nothing, a recent study shows what consumers could expect to see on window stickers if the idea becomes policy.

Research company Baum & Associates LLC, which advises automotive suppliers, set out to discover what the tax would mean in terms of an MSRP markup. The study’s findings are not good news for foreign automakers.

According to the study (via Bloomberg), Jaguar Land Rover vehicles would carry an average price premium of $17,000 per vehicle. For Volvo, the increased costs means buyers would shell out an extra $7,600 clams, on average, while Volkswagen aficionados would need to fork over $5,800 more.

Mitsubishi, which doesn’t have the U.S. manufacturing presence of its Japanese rivals, would see prices increase by just under $6,000. Mazda stands to add an average of just over $5,000. Meanwhile, both BMW and Mercedes-Benz flirt with the $4,000 mark. For many manufacturers, the only way to stay afloat will be to bring manufacturing stateside, which is exactly what Trump wants.

“The border tax approach will otherwise consume all of their profits from selling vehicles here,” the report states.

What about domestic automakers, you ask? Well, Ford comes out on top in this case — at least out of mainstream manufacturers. A border tax would add just $282, on average, to its vehicles. Rival General Motors stays in the three-figure range with $995, while the markup on Fiat Chrysler Automobiles vehicles would be just over $1,000. Tesla, on the other hand, builds all of its domestically sold vehicles in the U.S., placing it at the bottom of the list for price inflation.

According to a similar study by UBS Securities LLC, average vehicles prices in the U.S. could rise by 8 percent, or $2,500 per vehicle. Analyst Colin Langan told Automotive News annual industry-wide sales could slide by two million units.

To avoid saddling buyers of new vehicles with unreasonable costs, automakers could choose to return more of its America-bound production from south of the border, thus reserving Mexican production capacity for non-U.S. markets.

Steph Willems
Steph Willems

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  • Jeff Zekas Jeff Zekas on Feb 07, 2017

    Time for a history lesson. Back in 1950, ninety percent of TV's, cars, beds, clothes, furniture, tires, household goods, were made in the U.S.A. What changed? Nixon opened the door to China, flooding America with cheap goods. NAFTA allowed U.S. carmakers to move to Mexico where they pay $3.50 an hour. Instead of the "rising tide raising all boats" the tide dragged down everyone else to the level of Third World nations, which have no pollution controls and use child labour. So, a tariff is no more than a "pollution and slave labour" charge on countries which have gotten a free ride for the last free decades. Don't blame trump. Blame the Chinese and Walmart, who caused all production to move overseas.

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    • Seth1065 Seth1065 on Feb 07, 2017

      Two facts, one if we are gonna blame anyone blame us consumers, very very few are willing to pay top dollar for made in the USA goods, that is a fact the reason most TV, furniture ... that was once made in the US is now imported is price, we consumers now have 4 cheap TV's in our homes vs one expensive made in the USA TV, hell even Trump has had his ties made in china. As for the auto tax I think the car companies will not do much of anything, you build a factory for the long haul not 4 years, they will either trade some south of the border jobs for something they want w the white house i.e. cafe reduction or they will line up their lobbyist to put plenty of loop holes in the deal or they will flood congress w cash to stop it, if they will not it is only 2 years to midterm elections.

  • OldManPants OldManPants on Feb 07, 2017

    What Thumpers need to realize is that there is already a precedent for systematic discrimination according to percentage of favored/disfavored origin that was long used by America's original Deplorables: "So, is that Cruze an octoroon or just a quadroon?"

  • Arthur Dailey 'The capitalists will sell use the very rope that we use to hang them.' In our household we have cut down our shopping/spending and pay more to purchase products from 1st world nations or 2nd world nations that are our 'allies'. That also means quite often only buying and eating fruit and vegetables that are in season. Just like our parents and grandparents did.At least TTAC published an article on May 21st regarding LAN transformers that contravene the Uyghur Forced Labour Prevention Act being used in some BMW, Jaguar, Land Rover, and VW products?
  • ToolGuy I wouldn't buy any old Chinese brand of vehicle, but the right EV at the right price, maybe possibly yes. If you told me this would alarm Ford and torque off FreedMike, all the better. 😉P.S. I would *definitely* consider an EV made in Taiwan. Take that, paramount leader!P.P.S. China batteries/components to convert one of my ICE vehicles to EV? Yes.
  • Wolfwagen I expect Renault to be less popular than Fiat
  • ToolGuy Helium-3, baby!
  • Roman Our 1999 Pontiac Sunfire Gt is still running without any issues. 25 years and counting.