Auto Industry on the Brink of New Era due to Senator's Proposed Tariffs

At the Auto Forum New York, sponsored by the National Automobile Dealers Association (NADA), J.D. Power, and the Greater New York Automobile Dealers Association in conjunction with the New York International Auto Show, a heated discussion arose regarding the impact of tariffs on the U.S. auto industry.

Senator Bernie Moreno, a former franchised new-car dealer and first-term member of Congress, contradicted a lineup of economists and experts at the forum. Moreno, who maintains that the disruption from the Trump Administration's tariffs will be short-lived and ultimately positive for the U.S. economy and its auto industry, suggested that Ford, with a high level of domestic content, may have an advantage.

J.D. Power's Thomas King estimated the net effect of tariffs on a brand's consumer prices varies widely, with an average of $4,782 or 10.6% of average transaction price. Cox Automotive's latest retail sales-only estimate is similar, down from an earlier, pre-tariff estimate of 13.3 million units. The estimate for U.S. retail new-car sales in 2025, with tariffs, is about 13 million units, down from an earlier estimate of 13.4 million.

Patrick Manzi, NADA chief economist, stated that the likelihood of a U.S. recession today is probably 60%, up from 20% in January. Many speakers at the Auto Forum predict the tariffs will lead to higher industry costs, boosts in consumer prices, lower new-car margins for automakers and dealers, reductions in new-car production, slower auto sales in 2025, and potentially a recession in the U.S.

However, Moreno predicts that next year, the auto industry will look back at a fantastic year. He believes the tariff issue will be resolved within 60, 90, or 120 days and predicts the seasonally adjusted annual rate of sales to hit 16 million this year, including fleet sales, and head up to 20 million in the next few years.

Moreno is not anti-electric car but pro-choice. He criticizes the state of New York for trying to incentivize battery-electric vehicles with high tax breaks ahead of consumer demand. The Trump Administration aims to kill the $7,500 tax break for battery-electric vehicles and revoke California's permission to create emissions rules stricter than federal rules.

Moreno also jokes that experts who disagree with him should be forgiven, as recreational cannabis is legal in New York. Despite the disagreements, there is substantial variation among models from the same brand in terms of the impact of tariffs, according to King. There is a wide range in the estimated effect of tariffs, from single-digit percentages to as much as 25% of average transaction price.

In conclusion, while many experts predict a challenging year for the U.S. auto industry due to tariffs, Senator Bernie Moreno remains optimistic and predicts a successful year ahead. The impact of tariffs on the industry remains uncertain, but with various estimates suggesting a range of effects, it is clear that the situation is complex and will require careful navigation.