Trump tests his unconventional trade theory with auto tariffs.
The president’s broad taxes on cars and auto parts will now be tested in real time on the entire economy, allowing the world to witness who is correct.
Regarding the benefits of tariffs, President Donald Trump and his followers have been at odds with conventional economists for years.
Trump claims that tariffs have the simple consequence of encouraging businesses to relocate their factories to the US, which boosts American employment and wealth.
The effect of tariffs is anything but simple
However, the impact of tariffs is far from straightforward for many economists. They claim that in the long run, the tariffs will probably boost American auto manufacturing. However, they will also result in significant collateral damage that may undermine the president’s objectives for manufacturing, jobs, and the overall economy.
That's because tariffs will raise the price of cars for consumers
This is because, according to experts, tariffs will make cars more expensive for customers, deterring them from buying and weakening the economy. In addition to disrupting supply chains and increasing costs for automakers that rely on imported components, tariffs may temporarily lower U.S. auto manufacturing.
Additionally, they might result in retaliation against American auto exports and other goods that American businesses export overseas, which might spark destructive international trade wars.
On Thursday, global stock markets fell, with auto stocks hit hardest,
As investors took in the scope of Trump’s ideas, car companies took the brunt of Thursday’s worldwide stock market decline. General Motors’ stock, which imports a large number of its best-selling vehicles from Mexico, saw a decline of over 7%. Shares of Ford and Stellantis were also down. Carmakers had the biggest losses as European stocks ended Thursday’s trading day down.
