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THE EFFECTS OF A TRADE WAR

TARIFFS

It’s currently a hot topic, spanning several different industries and stretching across oceans. It has the potential to create an even stronger economy or cripple it. It’s the Trade War.

Over the summer, the US placed tariffs on imported products from China, Canada, and Europe. Goods such as steel, aluminum, lumber, and cars are affected. Chinese goods alone received tariffs worth $34 billion (with another $16 billion added earlier this month), prompting China to respond with its own tariffs on American products. This could only be the start as the president promised another $184 billion of tariffs on Chinese goods and threatened 20 percent across-the-board tariffs on imported automobiles and auto parts.

A coalition of 65 organizations across a range of industries including manufacturers, retailers, technology companies, and farmers have rallied to oppose the tariffs on China. The coalition states in a letter to US Trade Representative, Robert Lighthizer:

“Instead of inflicting maximum pain on China, tariffs will harm the American economy, worker, and consumer:

  • higher prices for American consumers;
  • higher costs for American manufacturers;
  • decreased demand for American-made products;
  • loss of market share to non-American, competitor companies;
  • decreased global competitiveness for American exporters; and
  • ultimately fewer jobs and less income for American workers.”

THE EFFECTS

How does the trade war affect those of us in the work truck industry? To begin, vehicles built overseas, in Canada, or in Mexico could cost a lot more if manufacturers add the new tariffs to the price of the vehicle (although there is a new NAFTA deal underway that could change this). Experian broke down the potential impact of a 25 percent tariff on the top-20 best-selling cars in the US. Guess what kind of vehicle is America’s top-seller.

You got it. Trucks.

Experian estimates an increase of $2,572 to $5,746 for the price of a Ford F-150. The price of the Chevrolet Silverado is expected to climb $3,993 to $7,650, and Experian projects an increase of $3,063 to $6,298 for the price of a Ram 1500.

The cost increase due to tariffs can be broken down this way: If a vehicle manufacturer uses $600 of imported steel to make one vehicle, a 25 percent tariff would translate to a $150 increase in material costs that would likely pass to the consumer in either higher prices or lower incentives (or both).

WHY IT MATTERS

The potential price increase of trucks fleet owners use every day could cut into their bottom line if a truck needs to be replaced or added to the fleet. And, the price of a truck isn’t the only thing to worry about.

Tariffs have the potential to affect multiple industries. Just last year, Bloomberg estimated a 21 percent tariff on Canadian lumber added an average of $1,360 to the total cost of each new home built.

We know that a fleet owner’s business doesn’t always start and end with their fleet. Their fleet is simply a tool to get work done. Experian estimates a price increase in steel, aluminum, plastics, batteries, and machinery, which affects many of our readers. And, although Experian’s numbers are only possibilities, we think it’s something to keep an eye on.

FOR MORE INFORMATION

Experian is a global consumer and business credit reporting and marketing service that supports clients in more than 80 countries. Read Experian’s report at www.experian.com/blogs/ask-experian/trade-war-heres-a-list-of-products-that-will-cost-more.


MODERN WORKTRUCK SOLUTIONS: SEPTEMBER 2018 ISSUE

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