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Tariffs Could Further Raise Record-High Vehicle Age

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August 8, 2018—Tariffs have been a major topic for many industries over the last month, but what does it mean for automotive repair shops?

A lot, actually, says John Scannapieco, as you can expect people to hold onto their cars for a longer period of time.

President Donald Trump has gone back and forth on whether or not he’ll actually implement tariffs on China and the European Union. Scannapieco, a co-chair of the Global Business Team with Baker Donelson, says automotive repair shop owners should be worried about tariff implementation. But in such a fluid situation he says, one of the big questions for the automotive industry is: where are we right now?

After threats of implementing 25 percent tariffs on certain European products, things are currently on hold regarding European tariffs. A couple of weeks ago Donald Trump met with European Union president Jean-Claude Juncker, and agreed to work toward eliminating tariffs and barriers on trade. It’s possible these tariffs could come back, Scannapieco says.

“We’ve seen this before, where nothing significant happens, and the tariffs come back,” Scannapieco says.

In terms of tariffs with China, the U.S. already has a full list on what items have been tariffed. Today, U.S. trade officials released a final list of 279 product categories that would be subject to higher tariffs on August 23, including motorcycles and several varieties of electric motors.

If Trump does eventually place tariffs on 25 percent of all imports of automobiles, which he has considered, a recent report from the Peterson Institute says the price of a new car could jump by between $1,400 to $7,000. This might mean customers will hold onto their cars for longer. If this is the case, Scannapieco says, the already record-high age of vehicles may continue to go up, and it’s possible repair shop’s businesses will go up if customers hold onto their car for longer.

In June, President Trump said the government was completing a study about increasing import tariffs on cars from the European Union, and the U.S. Commerce Department has a deadline of February 2019 to release its findings.

“It might be sooner than that if they want to do something,” Scannapieco says. “If this is just a let’s see what kind of legs we get out of it, we might wait a little longer.”

 

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