Did I miss something? Did anyone here think tariffs weren’t going to be passed on to the consumer? Show of hands: who didn’t think tariffs would be passed on to consumers?
I, for one, am excited about an incentive for consumers to move away from foreign made products and incentivize businesses to bring that stuff home to be made. Anything to take back some of that dependence on China is a-ok in my book. That’s part of the problem with Mexico: they have gotten into bed and snuggly with the commies.
Well, one thing you might have missed was the OP that I replied to didn’t follow that I was referring not to the tariffs themselves, but rather the mark-up portion that the OEM’s would implement. That applies to all vehicles. Not just ones that get a tariff.
As to your comments, the biggest issue isn’t that the cost gets passed down to consumers. The problem is that the cost gets passed down not only for imported vehicles, but also for domestic vehicles that were never even subject to the tariff in the first place.
And because of that relatively small increase across the whole sales fleet - that every auto manufacturer would have to do because they all have a heavy presence in Mexico - three things happen:
1) Every vehicle built in North America gets more expensive. Even if it’s built at an OG plant in the rust belt for Ford / GM.
2) Automakers have zero incentive to change any strategy about where they are going to build the vehicles / powertrain / etc., because the tariff isn’t even being paid by them, it’s being paid by the customer. And the marginal, across the board price increases from the passdown will keep sales intact.
3) Customers in the US have no financial incentive whatsoever to choose a car with heavy U.S. parts / labor investment over one that does not, because they are ALL going to be more expensive.
Therefore, tariffs don’t work. And that’s not even considering all the loopholes and parlor tricks that are available to artificially change the point of origin of various components. Again, the China / Mexico labor cost is 20% of the US. Labor is about 15% of the cost of the vehicle. Do the math on that. You reduce the labor cost by 80%, you are essentially adding 12% profit margin right there on the same vehicle by building most of it in Mexico instead of the US. For comparison, gross profit margin for the auto industry as a whole is only 13%. And you can apply the same principle to other industries as well. Nothing is ever coming back from China or Mexico, manufacturing wise. Ever. There’s too much to lose.
