Commentary: Trump risks the 'Cubanization' of the US auto fleet

The caller tariffs connected imported autos President Trump announced connected March 26 volition person profound effects connected automakers and car buyers. One of them could beryllium the "Cubanization" of the US car fleet: As car prices rise, buyers clasp connected to aged cars longer, and the mean property of the US fleet rises.

Cuba is famous, oregon possibly notorious, for the antique cars from the 1940s and 1950s that inactive ply the roads arsenic taxicabs and idiosyncratic vehicles. That's not a nationalist consciousness of nostalgia. When Fidel Castro's authorities seized powerfulness successful 1959, the United States imposed sanctions that are inactive successful spot and efficaciously support Western cars and car parts retired of the country. So, Cubans person had to marque bash with what they had anterior to the Castro takeover. While it mightiness look charming to visitors, jury-rigging state guzzlers with homemade parts successful a federation with substance shortages is an ongoing nightmare for galore Cuban car owners.

The Trump tariffs won't beryllium rather arsenic punishing, but if they stick, they volition rattle the full industry. Trump says that opening April 3, each imported cars volition look a 25% tariff. The existent tariff connected astir imports is lone 2.5%. A period later, large components specified arsenic engines and transmissions volition look the aforesaid tariff.

Read more: The latest quality and updates connected Trump's tariffs

About fractional of the 16 cardinal cars sold successful the United States are imports, and galore components travel from overseas, adjacent if the last assembly occurs successful an American factory. Morgan Stanley expert Adam Jonas estimates the tariffs would boost the mean car terms by astir $6,000. And that would use to domestics arsenic good arsenic imports, since higher prices for 1 acceptable of products usually let competitors to rise their prices by a similar amount.

Higher prices would depress sales. More radical would displacement to the utilized car market, which would propulsion those prices up too, the aforesaid arsenic it did erstwhile caller cars became scarce for a clip during the COVID pandemic. Higher prices volition halt immoderate radical from buying altogether and unit them to clasp connected to older cars longer.

"A strict implementation of a 25% tariff could adhd further elongation of mean car property (the 'Cubanization' of the US car fleet)," Jonas wrote successful a March 27 analysis. "The impacts are truthful perchance antagonistic that we conflict to spot however specified measures tin genuinely stay a 'permanent feature' of the US automotive landscape."

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Keeping much aged cars connected the roadworthy longer besides has implications for safety, exertion adoption, and substance prices. New cars usually travel with much information features and amended crashworthiness, which assistance prevention lives arsenic they go modular passim the fleet. New information exertion would get much dilatory if shoppers bargain less caller cars.