Tariffs and the Tax Cut

First Up 06/13/18

Tariffs and the Tax Cut
More than a few conservative intellectuals have warmed to Donald Trump’s trade protectionism because it supposedly helps blue-collar Americans. But what if his tariffs do the opposite, asks The Wall Street Journal. Erica York at the Tax Foundation crunched some numbers recently showing that Mr. Trump’s proposal for a 25 percent tariff on imported cars, trucks and parts could eliminate half of the income gains from tax reform for millions of Americans. Those in the lowest income quintile could lose 49 percent of their tax gains. The tariffs shave gains in all income brackets, but no one is hurt more than the poor and middle class. Tariffs are inherently regressive because low-income Americans spend more of their income on household goods. Commerce Secretary Wilbur Ross has argued that no one will notice price increases—what’s a few cents more for a can of soup? But people in Mr. Ross’s income strata are not the Trump base. The Commerce Department is still looking at whether a muffler is a national security threat under Section 232 of the Trade Expansion Act of 1962. President Trump should abandon the idea lest Americans wonder if they really benefitted from that tax cut. Read more here

Tariffs May Cost Carmakers 1 Million Auto Sales a Year
If President Donald Trump slaps a 25 percent tariff on imported vehicles, it may cost the U.S. auto industry 1 million annual vehicle sales – and that’s just the low end of the estimated damage. According to Bloomberg, the projection by researcher LMC Automotive assumes automakers would absorb at least half the cost of a tax on imported vehicles, said Jeff Schuster, senior vice president of forecasting. If companies pass the full 25 percent cost on to consumers, it could snuff out about 2 million sales, or more than 10 percent of annual U.S. deliveries, he said. President Trump’s order last month to investigate auto imports for potential trade penalties on national security grounds came as a surprise and quickly drew criticism from automakers, dealers, and Republican lawmakers. While some analysts discounted it as a negotiating tactic to pressure Canada, Mexico and the European Union on trade, Trump has since attacked Canadian Prime Minister Justin Trudeau following the G-7 summit in Quebec. Read more here

Toyota Dives Into Ride Hailing
Toyota Motor Corp. is making the largest ever bet by an automaker on ride hailing as it embraces new businesses that threaten to disrupt the industry's traditional model of vehicle ownership. According to Automotive News, the world's most profitable car manufacturer is investing $1 billion in Singapore's Grab Holdings Inc., valuing Southeast Asia's largest car-hailing service at just over $10 billion, according to a person familiar with the transaction. It follows an initial investment last year through Toyota's trading arm in the company that forced Uber Technologies Inc. out of the region. Toyota's outlay in Grab is double the size of General Motors's investment in Lyft Inc. in 2016, underscoring the sense of urgency CEO Akio Toyoda has in shifting the company toward mobility services. The 81-year-old automaker, founded by Toyoda's grandfather, is preparing for intensifying competition from peers as well as technology giants as the industry transforms. Read more here

Feds Label Fiat Chrysler, UAW as Co-Conspirators
Federal prosecutors labeled the United Auto Workers and Fiat Chrysler Automobiles NV as co-conspirators in a widening corruption scandal, an allegation at odds with claims the labor union and automaker were victimized by rogue employees, reports The Detroit News. The allegation, contained in a federal court plea agreement obtained by The Detroit News on Tuesday, potentially exposes the automaker and the UAW — a cornerstone of the modern American automotive industry — to criminal charges, fines, and governmental oversight, according to a former federal prosecutor. Federal prosecutors say the union and Fiat Chrysler conspired from before 2009 through 2015 to violate the Labor Management Relations Act and the automaker enabled nepotism to flourish at a blue-collar training center. The law prohibits employers or those working for them from paying, lending, or delivering money or other valuables to officers or employees of labor organizations — and from labor leaders from accepting such items. Read more here.  

Tesla Cutting 9% of Workforce and Home Depot Deal, CEO Elon Musk Says
Tesla said Tuesday that it will cut thousands of jobs, aiming to improve its finances amid a period of torrential losses as it accelerates production of its newest electric vehicle, reports USA Today. Tesla CEO Elon Musk confirmed the company is shedding about 9 percent of its workforce — "almost entirely" salaried employees but not production-line workers, according to an internal email he posted to Twitter. The company had 37,543 full-time employees as of Dec. 31, according to a public filing. At that level, 9 percent would equal nearly 3,400 jobs. The company, based in Palo Alto, California, also plans to end its deal to sell solar panels at home improvement chain Home Depot. Instead, Tesla will focus on selling solar power through its own stores. The moves come as Musk is facing pressure to ramp up output of the new Model 3 electric sedan and show bottom-line profitability. Musk said the cuts would not affect the company's ability to speed up production. Read more here

CNA National Adds Coverage for High-Tech Components
CNA National has offered top-of-the-line service contracts for vehicle buyers since 1982. The company has further enhanced its premier exclusionary coverage level – Automotive Preferred Care+Plus (APC) – to give your customers even more. Available for new, near-new and used vehicles with 125,000 miles or less at the time of sale, APC now includes the following components: LED lights, supplemental restraint system (seat belts and airbags), cell phone/Bluetooth connectivity and heated steering wheels. Additional highlights include flexible terms up to 12 years; expanded definitions for consequential damage and commercial use; and multiple deductibles, including a “disappearing” option that encourages customers to return to your dealership for repairs. To learn more, call 800-345-0191 x 450 or connect with CNA National online.  

Around the Web

Auto Parts Manufacturers Are Hurt by Tariffs, Rising Metal Prices [NPR]

2019 Audi S7 Spy Shots and Video [MotorAuthority]

12 New Cars with the Worst One-Year Resale Value [Forbes]

Next-Gen Porsche 911 Carrera to Start with 390 HP [Autoblog]