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Making Sense of the European Auto Tax Controversy

In recent weeks, President Trump has made several public threats to add or increase taxes on European auto imports in the interest of making American auto manufacturing more competitive. These threats are just the latest in a long line of back-and-forth responses related to trade between the US and European Union. While a lot of this seems academic on the surface, such changes could actually have a drastic change on the automotive industry here in the US and across the globe.

How can you tell if these changes affect you? That is the focus of this article as we look at this series of events that have led up to these statements and what future implications may be possible. In the end, this type of taxes and changes could have a major influence on how the automotive industry operates in the future.

 

Events Leading Up

President Trump made it clear that he is taking steps to give American businesses an advantage in American industries. For automotive business pursuits, this means that companies like Ford and Chevy ought to have a leg up over imports from Europe and Asia. To do this, the president has proposed a series of import taxes and regulations that will make it more difficult for foreign automotive exporters to do business with the US.

The proposed automotive tax is just the latest in a series of such proposed changes. In particular, the president has suggested greater taxes on raw material such as aluminum and steel used in auto manufacturing, and larger tariffs on imported foreign vehicles.

In response, organizations like the European Union have made promises of their own to increase taxes and tariffs on American exports. As a growing escalation, this type of conflict could easily get out of control if not measured from the start. In other words, taxes and tariffs can continue to increase if there’s simply used as a negotiation response or as a show of force.

 

The Potential Impact of Such Changes

There are two ways that you can look at the potential influence and impact of such changes. Regarding American interests, for example, these changes could actually satisfy what President Trump hopes to accomplish in the end. By favoring American automotive manufacturers through increased import taxes, such manufacturers will face less competition in the American automotive marketplace.

They could also potentially make more affordable cars using domestic materials. Right now, automotive manufacturing relies on a worldwide distribution network of materials sourced from different countries. While this is a good way to cut costs in certain areas, it can also lead to less durable cars in the long run when cheaper materials are used. By relying solely on American aluminum and steel, car manufacturers in the US government both have greater control over the quality of the materials.

On the other hand, these proposed changes could negatively impact the automotive consumer. One of the great things about buying a car today is the range of possibilities you have available. Countless auto manufacturers from all over the world compete for your attention and business. If greater taxes negatively impact foreign companies, this will reduce the number of options you have available.

People who have loyalty to foreign brands like Toyota, Honda and Nissan may face the brunt of the negative fallout of these changes. While many of these companies do have American plants, things get a little bit more complicated depending on the company and the particular model. In other words, some foreign companies may be more negatively impacted by these changes than others. Even specific models made overseas will start to be more expensive than their domestic counterparts.

 

Understanding the Potential Impact on the Auto Industry

It’s natural to try to determine just how large or small of an impact such tax and tariff increases will have. It can be difficult to comprehend just how much of an impact policy changes like these could have on the auto industry. On the one hand, it is easy to overestimate and exaggerate how influential these changes may be. Most automotive companies have faced challenging global changes and have survived with little or no issues. Some, in fact, even got their start after a major conflict like World War 2 where conditions were far less favorable for success.

On the other hand, the type of drastic change is unique given the globalized world the automotive industry now functions in. It is much easier to feel the major effects of small changes from halfway across the globe. More importantly, such policy changes can alter how companies do business without even causing direct harm. Since all companies need to adapt in order to survive, any manufacturer that fails to make ends meet if they feel the negative impact of these tariffs won’t last long.

 

What to Think

It is difficult to assess whether or not these future changes will actually be a benefit or drawback to you as a customer. In part, this depends on what kind of brands and models you tend to drive in the first place. If you are loyal or prefer American-made cars, the changes may be beneficial to you and your wallet. On the other hand, if you have a foreign vehicle or prefer foreign brands, it is difficult to say how you will be impacted in the long run.

As of right now, most of these proposed changes are just that: proposals. As a part of the international rhetoric between countries and companies, many of these proposals are nothing more than a show of force on the part of political leaders and CEOs. While it is entirely possible the taxes and tariffs will be raised, the exact specifics have yet to be announced and solidified.

Until more details are known, the best thing to think is nothing. Since these changes don’t affect you in the immediate future, you can continue to buy and use whatever cars you want without worry of paying extra prices.

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