UK car prices could actually fall thanks to Donald Trump’s tariffs

Dithering Donald, his tiresome tariffs and unpredictable U-turns are proving to be calamitously counter-productive. So, deliberately, this is not just another update on him and them.

Instead, I’m focusing on the unexpected results of the US President’s here today, gone tomorrow ‘policy’ announcements. Or are they just mumblings from an old bloke who makes stuff up as he goes along?

Either way, he at least deserves credit for placing cars, the auto industry and showroom prices at the top of the news agenda – where they should be. Industries don’t come much bigger than this. The world would be a far worse, poorer, less mobile place were it not for firms deep inside, or on the outskirts of the global auto business, that generate trillions of dollars and provide millions of reasonably paid jobs. 

Then there are the drivers (and passengers) of the world’s one billion-plus cars. They enjoy the freedom and flexibility that door-to-door cars give them 24/7 as they go to work, school, visit friends, loved ones, shops, health centres, churches, you name it. The ‘business model’ of affordable cars for ordinary people ain’t broke, so there’s no need to fix it.

Trouble is, the American Government is throwing a spanner in the works. It insists that far more cars must be made in the US, but here’s the thing: US workers don’t come cheap. They’re the fourth most expensive employees in the world, whereas across the border in Mexico (whose plants hugely impressed me when I recently visited some), salaries are massively lower, which in turn leads to far cheaper showroom products.

Unless motorists on modest incomes can buy affordable new cars made in the Mexican bit of North America, or in low production-cost Asian, East European or African nations, they’ll be priced out of the showrooms and off the road. Houses can still be bought in some states for $50,000 (£38k) or less, yet the average price of a new car in the US is about the same. And with the current (as we went to press) Trump tariff/surcharge of 
25 per cent, a Range Rover SV starting at $209,000 (£160k) in US showrooms would cost $50,000-plus more. Who’d have thunk it: a surcharge on a Brit-made 4x4 destined for an American motorist costing more than an entire home for an American family.

On a more positive note, if you’re a consumer in the non-US quarter of the western world, the likes of Kia, VW, Audi and several Chinese manufacturers with limited or no car-production facilities in the States are hinting that instead of paying hefty tariffs to the US they’ll divert more product to the UK and mainland Europe. So there should be plenty, possibly even an over-supply, of new cars available for us. Best of all, a flood of too many cars chasing not enough buyers inevitably brings transaction prices down. If and when this happens, we can thank The Dithering Don for facilitating it.

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