At a recent AIADA board meeting, I took over as the AIADA chairman from my friend, Maryland dealer Paul Ritchie. In just a few weeks, I look forward to formally accepting the chairman’s gavel at the NADA convention in Las Vegas during AIADA’s Annual Meeting & Luncheon. As a Volkswagen dealer I am particularly interested in what our keynote speaker, VW chief executive officer Hinrich Woebcken, has to say.
To be completely honest, I had hoped to have a quiet start to my time as chairman. The recently-passed tax cut package was a huge bonus to our industry, and I felt optimistic that we were starting the year on the right foot. Unfortunately, the past few weeks have been eventful — and worrying — for international nameplate dealers.
Earlier this month, President Trump announced his intention to place a 25 percent tariff on all imported steel and a 10 percent tariff on imported aluminum. AIADA responded with a strong statement, urging the president to reconsider his plan and pointing out that the flattening auto retail market is ill-equipped to absorb a significant bump in vehicle costs.
Then the next week, President Trump followed up on his tariff announcement by adding that he was prepared to place new taxes, up to 25 percent, on vehicles imported from Europe, citing a “big trade imbalance.” As a VW/Audi/Porsche dealer, you can bet that got my attention. AIADA again responded in a statement, saying “no one wins a trade war;” and Cody Lusk, AIADA president, went on CNBC to remind viewers of European brand dealerships’ enormous investment here in the United States.
The truth is: Tariffs are taxes. If the president follows through on his plan, which we have every reason to believe he will, American consumers will end up paying an estimated $3.5 billion more per year in new taxes JUST ON VEHICLES. That doesn’t even take into account the potential for retaliatory tariffs from our allies and trading partners, which could further devastate the American economy. The total cost of these tariffs has the potential to wipe out many of the gains made by the 2018 tax cut package.
Those losses will matter to voters, and they will be painfully felt by America’s 17,000 auto dealerships and 1.1 million dealership employees. In reaction to the tariff threat, as of my writing this, the Dow has dipped about 500 points, and the president’s top economic adviser, Gary Cohn, has resigned. Toyota, Ford, Volkswagen, Volvo and others have all issued statements condemning the tariffs and tax threat.
Large manufacturers will surely take a hit from these new tariffs, but small businesses like ours will bear the brunt of any trade war. We’re the ones with the razor thin margins, working tirelessly to meet the demands of increasingly price conscious customers. We’re the ones struggling to avoid layoffs, meet local, state and federal regulations, and pay the tax man on time. We’re the ones driving this economy, but we’re also the ones who will take the force of any collision.
Thankfully, AIADA is on the side of dealers, pushing back against new tariffs and taxes, and working with our brands in Washington, D.C., to develop strategies to protect our industry from the damage of a trade war. To the extent that the president may be using these tariff threats as a lever to move Mexico on Canada in his NAFTA negotiations, I wish him luck. But, I urge the Trump administration, and our legislators, to use caution when starting a trade war where everyone will lose.
Brad Strong is the 2018 chairman of the American International Automobile Dealers Association. This blog post originally appeared on the association’s website here. AIADA discussed this issue in a video available here and through the window at the top of this page.