Trump tariffs on autos, parts imports could add $4,711 to vehicle cost: Economist
Arthur Laffer, a prominent economist, warns in a new report that President Trump's looming 25 percent tariffs on foreign-made vehicle imports could lead to a dramatic increase in sticker prices and threaten the U.S. auto industry.
Laffer, as reported by The Associated Press, penned a 21-page analysis concluding that automakers would be in a better position if Trump were to stick to policies with Canada and Mexico outlined under the United States-Mexico-Canada Agreement (USMCA). The agreement was signed by the president in his first term.
He estimates that Trump's latest tariff plan could, on average, add $4,711 to the cost to buy a vehicle.
The research comes just days after Trump announced the U.S. will levy 25 percent tariffs on all passenger vehicles, light trucks and some automobile parts — including engines, transmissions and electrical components — starting April 3.
"Without this exemption, the proposed tariff risks causing irreparable damage to the industry, contradicting the administration’s goals of strengthening U.S. manufacturing and economic stability,” Laffer wrote in his analysis, according to the AP.
“A 25 percent tariff would not only shrink, or possibly eliminate, profit margins for U.S. manufacturers but also weaken their ability to compete with international rivals," he added.
The White House has described the move as a potential boon to American auto manufacturers, even though many vehicles made in the U.S. are built with parts from other countries.
“For the most part, I think it’s going to lead cars to be made in one location,” Trump said Wednesday of the impact.
The United Auto Workers union said it supported the administration's tariff agenda, offering a full backing for the “aggressive” push to boost production in the U.S.
Laffer, whom Trump has lauded in the past, didn't immediately respond to The Hill's request for comment. A spokesperson for the Laffer Center based in Tennessee said the full report will be posted publicly.