When tariffs go up, sales and jobs go down

Santa Clarita Valley Business Journal

By Cheri Fleming, dealer/principal for Valencia Acura

It’s simple economics — when the cost of producing goods goes up, sales go down. With a decrease in sales, jobs are lost.

A 25% tariff on imported autos and auto parts would decrease annual auto sales by 2 million units, according to the National Automobile Dealers Association. That equates to a loss of 117,500 of the 1.1 million jobs at new car dealerships, which is an average job loss of 10% per dealership.

While auto dealers in general support President Trump’s goals of modernizing U.S. trade agreements, trade actions such as new tariffs up to 25% on imported autos and auto parts would hurt the auto industry and consumers. New tariffs – impacting both domestic and international brands – would increase prices, stifle demand for new cars, and cost dealership jobs.

Most new vehicles sold in the U.S. are made in this nation by both international and domestic brands, but no vehicle is 100% domestic. Vehicles assembled in the U.S. have on average 40% international parts. A 25% tariff applied to all imported autos and auto parts would increase the price of vehicles sold in the U.S. by an average of $4,400 per vehicle ($2,270 for U.S. built autos and $6,875 for imports).

The projected decrease in sales would also lead to a loss of state and local taxes. Franchised dealerships in the U.S. provide 18% of total retail sales. That percentage skews higher locally as the auto dealers in the Valencia Auto Center contributed 21.7% of the City of Santa Clarita’s sales tax revenue in 2018 for a total contribution back into the local economy of more than $7 million from auto sales and leases. Those dollars help fund new city parks, trails, roads, open space, free entertainment, and sheriff patrols.

The unified voice of the auto industry is for Congress to ensure that any new trade initiatives do not unduly increase vehicle prices, stifle demand for new vehicles, or jeopardize American jobs.

Cheri Fleming is dealer/principal of Valencia Acura, a local, family-owned and operated car dealership, and on the Board of Directors of the Greater Los Angeles New Car Dealers Association. Owners Don and Cheri Fleming can be reached at (661) 255-3000. www.ValenciaAcura.com.

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