Dec 20, 2018

Myth 8: A Tariff on Cars and Auto Parts Would Mean More Cars Built in the US

12 Days of Christmas Trade Myths
Christine McDaniel Senior Research Fellow , Veronique de Rugy Senior Research Fellow

This is the eighth installment in a holiday-themed series aimed at correcting common misconceptions about trade. Each day until Christmas, economists Christine McDaniel and Veronique de Rugy will address a new claim about trade or tariffs while providing additional resources for those interested in learning more about the topic.

Myth: A Tariff on Cars and Auto Parts Would Mean More Cars Built in the US

As the Grinch would no doubt tell you, there is no better way to spoil a consumer’s appetite for a shiny new car made abroad than a 25 percent tax hike. But that doesn’t mean higher priced foreign cars will lead to more cars made in the USA. Santa and his elves (and US auto manufacturers) produce all our gifts using the best materials bought at the lowest prices from all over the world. But a foreign-car tax just makes all cars more expensive. More money for a car means less money for other things. This shrinks the American consumer’s buying power—hardly a merry outcome.

Suggested Resources

1. "Ford Will Not Build New Focus Cars in US, Despite Trump Tariffs Tweet," The Guardian

2. “Backfire Economics-Trump’s 25% Auto Tariffs Could Cost 715K US Jobs, Reduce New Car Sales by 2M,” by Mark Perry, American Enterprise Institute

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