Local businesses react to incoming auto tariffs
ST. LOUIS (First Alert 4) -- The past few years have been volatile at times for car dealers like John Eyermann.
Eyermann owns STS Auto Group in Dogtown, a used car dealership. While car prices and sales have returned to normal over the past year, he said, he still feels that prices are too high for many consumers.
Eyermann hasn’t been sure how to react to President Donald Trump’s recent announcement of new 25% tariffs on imported automobiles and parts. He said he believes that the move could benefit U.S. manufacturing in the long run, but that he is concerned about price hikes for new cars that would ripple into the used car market.
“I think everyone’s a little spooked because cars could get more expensive and I think they will. There’s no way around that,” Eyermann said.
In February Kelly Blue Book estimated that the tariffs would drive the average cost of a new car up by $3,000, with some models seeing price increases of up to $10,000.
The taxes could also impact imported car parts, too, which could increase the cost of repairs.
Joe Barbaglia, the owner of Columbia Auto, said that many car parts are sourced from countries all over the world.
“It’s going to impact our business down the line,” he said. “Cars will be more costly but our work will be increased as people fix used cars to keep them.”
But Barbaglia felt that tariffs would be a good policy for American manufacturing, encouraging automakers to bring back production from overseas.
“I think it’s going to boost the workforce and jobs over here,” he said.
Many economists have criticized the tariffs, pointing out that manufacturers may struggle to shift production schedules, and that the added costs would hurt consumers.
New car dealerships like Don Brown Chevrolet would likely see the early impacts of the costs. But Don Brown, the owner of the dealership, said he felt that increased car prices were not a foregone conclusion.
Brown said he felt that Trump’s threats of tariffs were largely a negotiating tactic, and that initial price shocks may level out over time.
“I think there will be a little bump but I think the dust will settle and it’ll go back to normal,” Brown said.
President Trump on Friday suggested he could implement a tax deduction for those paying interest on auto loans for cars made in the U.S.
A tariff is essentially a tax on anything that’s going to be imported into the country where the consumer pays for it. The Trump istration’s pitch is a tax deduction will cut consumers some slack.
Advocates said this could encourage buyers to buy domestic, ing U.S. manufacturing. Opponents said its robbing Peter to pay Paul as the price of cars and loans increase.
Little help for middle class
Assistant Professor of Economics Dave Sanders with the Richard A. Chaifetz School of Business said this will mostly benefit the upper class because of how they file taxes.
“He [President Trump] is saying it’s going to work the same as the standard deduction for your mortgage, which is going to be applied only if you itemize,” Sanders explained. “I think a lot of middle-class consumers take the standard deduction and I think they’ll still continue to take the standard deduction, so they may not see the benefits from that.”
Tariffs on top of tariffs
Pieces to build a car come from all over the world and can individually carry a tariff.
“It’s possible that they may actually leave the country again for different assembly components and then be re-tariffed whenever they return to the country as well,” Sanders shared. “It’s possible that some of these cars are going to be no matter what, even if the assembly is done in the United States, seeing some portion of the car. Being imported and subject to those tariffs.”
Sanders said what is most likely the value of that special favor to consumers to deduct interest on loans – that will be added to the cost of the vehicle.
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