Proposed Border Tax Would Hurt Low-Income Car Buyers Most, Study Finds

by NESN Staff

February 10, 2017

President Donald Trump hasn’t wasted any time pushing forward some of his more contentious campaign promises, putting automakers on edge as a potential tariff on imports from Mexico looms. Manufacturers might not be the only ones with cause for concern, however.

A new study from car-buying site Carjojo found a 20 percent border tax would have a disproportionate negative impact on low-income car buyers, USA TODAY reports. The study notes that roughly one-third of subcompacts sold in the U.S. with an MSRP lower than $20,000 are manufactured in Mexico.

Many consumers purchase these models because they offer reliable transportation for an affordable price, but Carjojo’s study suggests that would no longer be the case if Trump implements a border tax.

“The effect of this tariff on prices is quite concerning, not just for our industry for the financial welfare of those families,” Carjojo CEO Peter Levy said, via USA TODAY.

The average price of Mexico-made subcompacts currently is $16,850, but Carjojo claims a tariff would increase the average price per vehicle to $19,529, including an average 6 percent sales tax. Alarmingly, that reportedly is a conservative estimate.

Analysts predict automakers would eat a portion of the tax to reduce the negative impact on their sales. As a result, the study calculated price increases based on a 15 percent tariff.

It’s worth noting Trump floated figures as high as 35 percent prior to taking office.

This isn’t the first time concerns have been raised about the impact Trump’s plan would have on consumers. Toyota recently urged dealers to lobby against the tax by stressing to politicians it would harm car buyers.

As eye-opening as Carjojo’s findings are, the company’s study didn’t even look at the impact on prices of domestically made vehicles, many of which use parts sourced from Mexico.

Thumbnail photo via Ford

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