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What Trump's proposed tariffs mean for consumers
A new era of trade wars may be coming to the U.S. with Donald Trump returning to the White House. The proposed tariffs could reduce choices for consumers buying a car while businesses that sell foreign cars will be hit the hardest, one analyst told FOX 2.
(FOX 2) - With President-elect Donald Trump gearing up for a second term in the White House, the world is bracing for a new era of potential trade wars.
When he campaigned, Trump promised to reshape relations with China with the threat of tariffs. That could have major implications for the country's domestic economy and especially Michigan's auto industry.
While speaking to supporters after being projected the winner of the presidency, Trump said he "will govern by a simple motto: Promises Made, Promises Kept."
During his first term, Trump imposed tariffs on over $360 billion worth of Chinese goods. Bejing eventually worked out a more favorable deal. But this term, he says he has plans for even more dramatic measures - including a blanket 60% tariff on all Chinese exports to the U.S.
That means China losing potentially half of its projected growth. In the U.S., Americans will likely see the impact in their pocket books.
"In general, we as economists - we all agree tariffs are not good for the economy," said Zeina Alsalman, who is an economist with Oakland University. "It's consumers who pay the price and we know consumer spending makes up about 70% of the U.S. GDP."
Tariffs are designed to protect domestic industries, Alsalman said. But the benefit to the economy within the U.S. is slim, she added.
"It's a source of tax revenue for the government, but it's a tiny percentage of the revenue collected by the government," Alsalman said.
Among the exports that could be impacted are imported car parts and foreign-made cars, which could be crippling for consumers, auto analyst John McElroy said.
"What consumers would face is much reduced choice because of a lot of what's imported. It would take years to get that stuff tooled up to get built in the United States," he said. "But if Trump carries through on the promise of a lot more tariffs on imported cars, you will see more production in North America."
It was during the Covid pandemic that the U.S. learned about the need to strengthen its manufacturing within its borders after shortages in parts began to appear.
But kick-starting building more things like computer chips in the country can take years due to the investment and time it takes to build up facilities. If tariffs are deployed, McElroy estimates it will be businesses that sell foreign-made cars that will be hit the hardest.
"Dealers that sell those imported cars, whether it's Mercedes or BMW or Toyota or whatever it happens to be, they're really going to take it on the chin," he said.