While the emergence of Donald Trump as the President of the United States presented an opportunity for change throughout every industry and sector, the auto industry has the potential of taking a crippling hit that can become dismantling. Car manufacturers rely on many different aspects of the global economy in order for it to operate successfully. With jobs being one of the most important factors that contribute to the nation's economic status, employment opportunities can become stifled when sales began to decline- which only leads to more decreases in auto sales as the cycle continues.
Even more, fewer sales mean decreased profits for investors, which in turn affects the stock market that heavily influences consumer confidence. There is a long chain reaction of events that occur when Trump announces legislative proposals that target industries that are extensions of the auto industries. So without even directly attacking manufacturers cars, Pres. Trump has made suggestions under the authority of his administration that would not only unfairly punish automated investors, but cause a ripple effect that will further dissipate the middle class.
Border Tariff On Imported Cars Can Be Hefty
Car manufacturers became nervous the second they heard about Trump's proposal of building a Mexican border wall. While the idea is built around the perception of national security, the implementation of the wall comes with a 20% tariff of that stands to increase the cost of North American manufacturing and make them effectively a competitive with other countries.
That would mean that vehicles that are manufactured in Mexico and then transported to America as an import would increase in price by more than $2300 each. While the increase in price is unattractive, to say the least, Pres. Trump has proposed an administrative plan to roll that fuel economy look regulations and lower corporate taxes. The money that will be saved by Trump's plan could potentially offset the cost of the proposed tariff, so all hope is not lost just yet.
Car Sales Could Dwindle Due To Economic Instability
The already cyclical sales decline could accelerate to a much faster pace as Trump's administration further contributes to consumer doubts and fears. Without effective policies and job creation, consumers feel the tightening of their wallets as the cost of living increases while their incomes remain the same or altogether dissipate. Since the inauguration, Trump's administration has released multiple proposals for policies, with some measures of effort towards creating a few hundred jobs here or there. Not yet has he developed an economic plan specifically addressing the lack of jobs that are available to the working-class and middle-class citizens of the country. And without a sign of hope for the American people, their lack of confidence and fears dictate their consumption.
This, in effect, hurts the car industry as fewer people have dispensable income or sufficient credit to acquire newly produced vehicles. And with the continuous announcements of business closures and employee layoffs, consumers fears are already heightened was has resulted in a flat-lining of all car sales. The acceleration of the dwindle can be sooner than we think, with first-quarter sales reports delicately hanging in the balance. Without a minimum of 60 million in sales, the acceleration can be full-blown by this upcoming summer.
Global Trade Relations Could Become Destabilized With Trump's NAFTA Withdrawal
Just as Pres. Trump has pledged controversial trade protectionism notions, blaming American corporations for relocating their manufacturing facilities to the country of Mexico and abroad, Donald Trump has also proposed to withdraw from NAFTA, deny the approval of the transpacific partnership and thereby punish the auto industry for conducting international business.
Effectually, the withdrawal and denial would cause cars makers to choose between relocating the facilities back within the borders of the United States or incur increase tariffs a 35% – a 15% increase that results in a 3% increase that is absorbed by consumers at the cash register. This decision by Commander-in-Chief Trump the first domino in a chain that is ready to tumble over, seeing how the auto industry is so well integrated into the American economy. The decrease in car sales means unhappy investors, a tumbling stock market, enormous job losses and a detrimental lack of supply for an existing demand. While one can only hope that Pres. Trump understands the magnitude of the consequences of his proposals, industry executives are well aware and are ferociously scattering for solutions that can prevent the entire industry from collapsing.