Paul Ryan, the current U.S. Speaker of the House, and other Republican leaders are suggesting an adjustment be made to the border tax. This proposal would remove tax breaks for US companies that import products from other countries, and would give a tax break to those companies that export their products to other countries. The auto industry, however, is increasingly unhappy with this idea. Their opposition is based on the fact that this would likely increase the price tag on cars, which would lead to problems for auto manufacturers, dealers, and consumers.
“Tax reform should not be financed by an increase in border taxes and goods, taxes that will drive up the prices of trucks and cars sold in the USA,” said Mark Scarpelli, chairman of the National Automobile Dealers Association. “That is not a good equation.”
Speaking at the 2017 Automotive Forum, Scarpelli asked dealers to vocally oppose the proposed border tax, although specific legislation has yet to be introduced.
“We need to make sure that Washington fully understands the potential for this tax to pose a serious threat to vehicle affordability,” Scarpelli said.
Many others agree with Scarpelli’s statements, with some estimating that a border adjustment tax would result in an increase of as much as $3,000 per new car or truck, with the potential U.S. sales losses being 2 million units per year.
Will the border adjustment tax make it through Congress? Although many auto industry experts believe that it has already lost substantial support, there are others who think that the industry must continue to fight against it.
“I come from the school of politics that it’s never dead until it’s actually dead,” said John Bozzella, CEO of automotive lobbying group Global Automakers. “Look, this is a proposal that raises taxes to cut taxes. And it raises taxes on every single car that every single dealer in this room sells. This raising taxes to lower taxes just should not be done.”
Trump’s statements about wanting to overhaul the North American Free Trade Agreement (NAFTA) mark another important potential change for the auto industry. Although some believe that NAFTA has caused the loss of many U.S. manufacturing jobs to Mexico, others say that more manufacturing jobs have been lost to automation and to China than to Mexico.
In fact, Bozzella believes that NAFTA has actually been beneficial to the North American auto industry, allowing it to become more efficient and to maintain leadership in global production.
“The fact is, NAFTA has been a success story for the industry,” Bozzella said. “And as we look to modernize NAFTA … let’s make sure that we continue to recognize that agreement has made this market an absolute powerhouse.”