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Trump’s Mexico Tariffs May Raise Auto Costs

President Donald Trump announced on May 30th, 2019 that he would impose a 5 percent tariff on all Mexican imports beginning on June 10th, 2019. The tariffs will increase to 10 percent on July 1st, 2019, then increase 5 percent every month until reaching 25 percent. Trump said the tariffs will remain in place “until such time as illegal migrants coming through Mexico, and into our Country, STOP.”

As car accident lawyers, we’ve seen the price of cars steadily increase over the last decade. With these tariffs, we expect to see car prices rise. Increased car prices will almost certainly lead to increased auto insurance and gap insurance premiums. The tariffs if sustained are likely to have a ripple effect throughout the economy. It’s possible the tariffs could also cause an increase in Lyft and Uber fares, since drivers will have to pay more to purchase and insure their vehicles.

The auto industry in the United States has been cutting costs as of late to fund research into electric and self-driving vehicles. This means that the auto makers will likely pass on the cost of the tariffs to consumers. Deutsche Bank estimates that a 25 percent tariff would increase the average price of a new vehicle by $1,300, saying that such a tariff would cost General Motors, Fiat Chrysler and Ford $6.3 billion, $4.8 billion and $3.3 billion, respectively. Deutsche Bank said the tariffs might cut United States auto production by 3 million vehicles per year, or an 18% drop.

Consultancy LMC Automotive said that a 25 percent tariff could cut United States automobile sales as much as 1.5 million units per year. LMC said that the price of automobiles imported from Mexico may increase by an average of $8,500 per vehicle, and that the average price of vehicles sold in the United States could increase by as much as $2,500-3,000 after parts made in Mexico for assembly in the United States are factored in.

Mexican-made auto parts are very commonly used by American automobile assembly plants. Around 70% of all wiring harnesses used in U.S. assembly plants are imported from Mexico. The United States imported $59.4 billion in auto parts from Mexico in 2018, and about 16% of all auto parts used by United States assembly plants come from Mexico, which is the single largest foreign source of auto parts.

Stock shares for GM, Ford, Fiat Chrysler, BMW, Volkswagen and Mazda all fell following the announcement of the tariffs.

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