Love The Trump Border Tax? Hold On To Your Wallet!

 

Donald Trump’s enduring hatred for Mexico and all things Mexican is going to cost consumers a fistful of dollars. If enacted, his capricious attempt to punish Mexico could see car prices rise as much as $2,500 on average. Thanks for nothing, your Trumpness! The Trump border tax proposal sounds good on Twitter but lacks any careful analysis or details. That leaves a lot of room for speculation. What follows is nothing more than a compilation of guesses by people who claim to have some expertise in the matter.

Trump border tax impact

Colin Langan, an analyst at UBS Securities, has an opinion on the Trump border tax. He suggests Trump’s Make America Great proposal will make Americans a lot poorer. If enacted, the plan could raise average vehicle prices in the U.S. by about 8 percent, or $2,500 per vehicle, Langan says. If that happens, he predicts car sales in America would be reduced by 2 million vehicles a year. How “great” is that? Thank you, Donald.

Another guestimate circulating among corporate boardrooms this week is from Michigan based industry analyst Alan Baum. In his view, which he calls a “thought exercise,” Baum estimates most automakers would need to raise vehicle prices by thousands of dollars, although some would fare better than others.

Tesla would suffer almost no impact, as its cars are all made in the US and use predominately US made parts. The impact on Ford would be quite modest at an estimated $282 per vehicle. The bite on GM  products would be larger — about $1,000 per vehicle. Volvo and Volkswagen would need to raise prices by about $7,000 per vehicle on average. Land Rover would see its prices shoot up by as much as $17,000 per vehicle!

Subaru, Mitsubishi, Mazda, and Hyundai/Kia Motors Corp. would have to build new manufacturing plants in the US, pay someone else to build their cars, or simply exit the US market, shutting down their sales, parts, and distribution networks on the way out the door.

“The plan results in a net cost for automakers,” Baum told Bloomberg in a telephone interview. “Each company will then make its own decisions on pricing in order to best compete and maximize its profits.” The chart above is how Baum sees the border tax affecting car companies that currently do business in America.

Others predict the border tax would lead to 1,000,000 more cars being produced in the US every year, which would add about 50,000 jobs to the economy. But that prediction does not take into account the hundreds of thousands of jobs that would be lost if consumers can’t afford to pay higher prices for those cars. Tax and tariff policies are two edged swords that cut both ways, a fact that The Donald apparently cannot wrap his addled brain around.

Predictably, corporate America is choosing sides, depending on who stands to win or lose based on the Trumpian border war plan.  General Electric Co. and Boeing Co. are in favor while Toyota and Wal-Mart warn it will cost consumers dearly as a result of higher prices for food and clothing, gasoline and auto parts.

So, OK, Trump supporters. How much more are you willing to pay to make America great again? Don’t be shy. Step right up and tells us — publicly — how many of your dollars you are willing to contribute to the cause. Usually, people are all in favor of broad ideas until they find out they come with a financial cost. What are the odds that those who proclaim their love for The Trump Who Stole America the loudest will be the first to scream bloody murder when they find his policies will take money out of their pockets? So much for standing on principle.

We may not need to worry, though. According to Colin Langan, a draft bill to implement the new border tax scheme should be ready for consideration by Congress later this month or in March. He thinks there is a good chance it will get approved by the House of Representatives but is “very unlikely” to pass in the Senate. Dear Donald may be shocked to find that in the real world, even presidents have to deal with Congress and cannot simply rule by decree.

Source: Bloomberg





About the Author

I have been a car nut since the days when Rob Walker and Henry N. Manney, III graced the pages of Road & Track. Today, I use my trusty Miata for TSD rallies and occasional track days at Lime Rock and Watkins Glen. If it moves on wheels, I'm interested in it. Please follow me on Google + and Twitter.
  • WebUserAtLarge

    OK, on the bright(ish) side… 2 million ICE off the road – hmmm… not such a bad thing. Tesla with the upcoming M3 having no negative pricing impact? Not such a bad thing either. Could that be that the Orange Ogre inadvertently would help bury the ICE industry and replace it with EVs? Wouldn’t that be something? 🙂

    • Steve Hanley

      Ah, the law of unintended consequences at work. I love it!

    • Mel

      Or 2 million older ICE’s with worse emissions doing the driving instead of more modern cars…

  • Jim Smith

    Interesting to see how people change their views on these things based solely on who is the president. Now we have leftists, wanting to continue the US job destroying, environment destroying, and illegal immigration root cause. Why pay a union member a living wage to make cars and other goods, when the jobs can be freely exported to slave labor and freely polluting industry in Mexico? How about those worker protections for Mexicans? Not a care in the world. How about all those Mexican farmers put out of business due to the US taxpayers heavily subsidizing US farmers? Since NAFTA the poor in _both_ Mexico and the US have gotten a lot poorer, and the rich have gotten a lot richer.

    But Trump is bad and NAFTA is good. And it is not like Obama or CrookedHillary campaigned on renegotiating NAFTA. Remember, Trump is bad and NAFTA is good.

    • Steve Hanley

      My intent is not to denigrate or applaud NAFTA. I was an H Ross Perot supporter, after all. My purpose is to point out that Trump’s belligerence is going to cost a lot of people a lot of money — something I am willing to wager will come as a big surprise to those who are supporting the Twitter president!

      • Jim Smith

        “Trump’s belligerence”, that sums up your viewpoint, very clearly. Never mind the realities of NAFTA, your blind hatred of Trump, is the only thing that matters to you. Why else would you include such a statement in your response? Is Trump perfect, heck no. But compared to Hillary, he is a saint.

        To me, NAFTA with all its carve outs for the politically connected, disregard for the working class in Mexico, US, and Canada, and disregard for the environment, make it terrible. Just like the TPP. We can do better for all the countries involved, especially the US.

        • Steve Hanley

          I make no pretense about my loathing for Trump. The man is an ignoramus who shouldn’t be put in charge of a Boy Scout troop, never mind an entire nation. I am very forthright about my antipathy toward the man and make no apology for it.

          As for NAFTA and all the other global free trade agreements, I was horrified then and am still horrified that so many nations would willingly cede pieces of their sovereignty to the WTO. That transfer of power was accomplished stealthily with no attempt to educate the public. It may be the greatest heist in the history of mankind.

          But it was gleefully supported by politicians of all political persuasion, thanks the boat loads of money corporations shoveled at feckless politicians who shirked their duty to the electorate to line their own pockets. In my book, that is called theft, though I doubt anyone will ever be called to account for it.

          • Rick

            The Trump in charge of a boy scout troop. Ahahahah, I can see it now, hillaryous.

          • bioburner

            Yea hilarious . He cant fire them so then he can’t control them.

    • trackdaze

      Correct Trump is bad. Incorrect Nafta not so good.

  • Eco Logical

    I’m not sure about Mexico but under NAFTA exports to Canada are not taxed. If Trumps axes NAFTA all bets are off. I agree that an extra tax would make American vehicles much more expensive since north American manufacturing is highly integrated (most American vehicles go back and forth between Canada and USA about 6 times before a vehicle is complete). How this works is fairly complex and if each crossing is taxed it illustrates how axing NAFTA could raise prices for both Americans and Canadians … unless our ‘leaders’ negotiate a ‘bilateral’ (Canada ~ USA) replacement for NAFTA i.e. CAFTA.

  • Burnerjack

    You can pay more for employment or more for unemployment. If I have to choose, I choose the former.

  • Chris Overholt

    I’m not a T$@!% supporter, but I think i have to play devils advocate here. I assume the costs will go up because they are made in America and will be paying higher American wages, is this correct? If so isn’t this a good thing? Those higher paid American workers will then go out and spend those wages here which then helps the economy. Isn’t that a good thing? Now we just have to bring back all the manufacturing sectors that all presidents from Reagan to Bush allowed to be shipped out of the US (Obama didn’t do much around this nor would the repubs had been cooperative if he tried to bring them back).

    • Steve Hanley

      Great comment, Chris. And of course you are correct in your arguments. But here’s the thing. As frequent commenter Jim Smith says, everyone is in favor of more jobs and higher wages but nobody wants to pay for them. Americans SCREAM if gas goes up ten cents a gallon. Imagine the outpouring of vitriol if the average price of cars rose $2,500? OMG!!!!!

      If folks were honest with themselves, every Trump supporter would be boycotting Walmart, the poster child for the job destruction that free trade agreements have created.

      I just came from Walmart a few minutes ago. Quite a few pickemups with Trump stickers on the back window in the parking lot. That sort of cognitive dissonance is what makes me question the intelligence of the American public.

      • bioburner

        The people who own/run WalMart are doing everything they can to enslave poor chines workers and hiring US employees at subsistence wages to maintain their growth in their dividend payments.

    • t_

      By imposing import taxes, the USA will achieve following:
      1. Higher prices(It might cost more to import something or to produce it in the USA). Everyone in the US will get poorer.
      2.Some jobs might be added, although the companies might bring more fully automated factories. Of course, they want to make profits and will substitute the low paid Mexicans with as many machines as possible, as labor is much more expensive in the US.
      3. Higher cost of export. In history till now every time a country raises import taxes, an answer from the other side comes shortly. This means, that the export sectors of the USA will be hurt and will not be able to export, at least not so much. This will cost jobs and actually “ship” jobs to the competition. In 99% of the cases there IS competition outside of the US.
      4. Usually companies move lower value added businesses to countries, where labor costs less. It is not the case with the car factories moved to Mexico, but this is more likely an exception.

  • trackdaze

    Forget about cars Steve. The real dilemma is mexican beer!

    Seems silly to be wacking the american citizen roughly 60billion in taxes for a fence thats going to cost 8billion.

    Besides the good neighbour fence provisions allow you to recoup half the cost of a shared fence. I guess the operative part is good and you do have to follow a formal process. So little hope in that regard too.

    • bioburner

      I think we need a grounding cable to reality when it comes to the “fence”. First off most of the Spanish speaking people sneaking in the USA via Mexico are not Mexicans. They come from all over south and central America. Why would Mexico want to pay to build a fence to stop those people from leaving their country? America may/need the fence but Mexico does not need it or want it. Again Dump is showing us that he has no idea what is going on or how to stop it.
      But yeah if you put it into terms Trump supporters and understand it will get some attention. Telling dump supporters the cost of a case of Corona is gonna go up will put a stop to that noise.