Trump Provides Exemption for Tariffs to Motor Vehicles
The only thing that is predictable about the second Trump Administration is that it is unpredictable.
We have written to great lengths about tariffs proposed by the federal government and its effects that it would have on the trucking industry, both positive and negative, but the latest news shows the results of a research probe on domestic truck manufacturing capabilities, and to that end the government is putting the brakes on tariffs for truck components.
Details
The tariffs do not disappear completely, however, but they prevent items from receiving two forms of taxation because it fits into more than one category (say, a truck part made out of steel coming from Canada being taxed at 25% for being both an auto component and steel, leading to a total price increase of 56.25%).
“I have now determined that, to the extent these tariffs apply to the same article, these tariffs should not all have a cumulative effect (or “stack” on top of one another) because the rate of duty resulting from such stacking exceeds what is necessary to achieve the intended policy goal,” Trump said in the order.
Much of what we said about tariffs otherwise still apply. For instance, demand for foreign goods will inherently go down, but the demand for comparable domestic goods is likely to increase, resulting in shorter trips for truckers to travel in order to make a delivery.
Conclusion
With tariffs still being applied at 25%, it is likely that a market change is set to happen. Trucks with a higher average of American-made parts are likely to gain a competitive edge in units sold, while used trucks with foreign parts are likely to see an increase in demand (and therefore price) because they are already within U.S. borders and not subject to the tax.
As we said at the start of this article, the only thing that does not change is change itself, so it is very well possible (and likely) that forecasts will continue to shift. We will be sure to keep you posted if anything interesting develops from the desk of the president.
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