46% of the 16 million cars sold in the US every year are imported:
Interesante lo que dice https://x.com/Brad_Setser
A few thoughts on the 25% tariff on imports of finished automobiles.
Imports are just under $275b (2024), or just over 0.9 pp of US GDP. The "just pay it" cost of the tariff is about 23 bp of 2024 GDP ...
The "just pay it cost" of the 20% tariff on China (30 bp of GDP) and "finished autos" (23 bp of GDP) already exceed the "just pay it cost" of the Section 301 tariffs of Trump's first term (15% on 2.6 pp of GDP, or 40 bps of GDP) -- and that is before the RECIPROCAL tariffs
The auto tariffs (and other 232 tariffs like steel and aluminum) will be on top of other tariffs if I heard correctly -- so if there are ~ 20% reciprocal tariffs on imports from the EU, certain imported cars would face a 45% tariff. That's prohibitive
With ~ 4m cars from USMCA trade partners facing 25% or more tariffs, the equilibrium auto price in the US is gonna go up, even if imported parts were excluded from the tariff ...
Americans producing parts for cars assembled in Canada and Mexico are gonna feel the pain -- and there is a risk (a real risk) I think that US auto buyers go on strike and just don't buy any cars for a while ...
Over time, firms will have to move final assembly to the US -- but in the interim, the US market will be under supplied absent (expensive) imports and Americans may simply try to wait it out ...
The two countries most exposed to these tariffs imo are Mexico and Korea. Auto exports from Mexico to the US were $95b last year, or about 5% of Mexican GDP. Watch the Mexican peso tonight and tomorrow ...
Imports from Korea have been growing strongly and now top $35b, or 2% of GDP -- so Korea is more exposed relative to the size of its economy than either Germany or Japan.
In terms of retaliation, Canada and the EU have the strongest cards -- US imports of finished cars from Canada only slightly exceed Canadian imports from the US, so Canada can inflict some reciprocal pain
The EU is interesting b/c US exports to the EU aren't trivial ($11b in 2024) and are mostly US made SUVs for the German marks. BMW and Mercedes may lobby to avoid any tariffs on their exports back to Europe, but the EU can force SUV production to move back if they want
The tariff man is gonna tariff -- these aren't small moves, and they pose some risk to the US economy.
And the "reciprocal" tariffs, the 232s on copper, pharma and chips and the 301 review on China are all still in coming
Abrazos,
PD: Los que vamos a diario, cogemos mucha rutina, muy mala. Hay que pararse cada día y entender lo que vamos a celebrar, seguir las oraciones y saber que se hace presente el Señor, que luego nos comemos.
Los que van solo los domingos, ¿se enteran menos?
Y los que no van nunca, se lo pierden…
