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Will Trump’s tariffs affect Aussie car buyers?

24/01/2025 by Mark Schneider in Industry news

Say what you will about Donald Trump, but he’s one of a kind. Well, we hope so, anyway. Has there ever been a more unlikely, more mercurial politician on the planet? The impact of this unpredictable president is by definition, impossible to predict, though the impact of his threat to start a new trade war with tariffs on everything imported, is a little easier to foresee.

So what is a tariff, and will it have any impact on Australian car buyers? After all, with the exception of the luxury car tax (LCT), Australian buyers aren’t facing big tariffs to protect a domestic vehicle industry that no longer exists – just a 5% import tariff from countries that don’t have a free trade agreement with us.

What’s a tariff?

Tariffs are taxes imposed on imported goods, designed to protect domestic industries from foreign competition, generate government revenue, and sometimes act as a negotiation tool between international governments. Trump's administration has been known for its protectionist stance, imposing tariffs on various imported goods to encourage domestic production and reduce trade deficits.

Now Australia has no interest with starting a trade war with anyone, so surely it won’t affect imports from Japan, Korea, China, Thailand or Europe? Well, not so fast, because the automotive industry relies on complex global supply chains, with parts and components often sourced from multiple countries. Trump's tariffs could disrupt these supply chains, leading to delays and increased costs for manufacturers. For example, if tariffs are imposed on automotive parts imported from China, manufacturers may face higher production costs, which could be passed on to consumers in the form of higher vehicle prices.

Unstable environment

On top of that, the uncertainty around trade policies and potential retaliation from other countries could create an unstable business environment for automotive manufacturers and importers. This uncertainty may lead to reduced investment in the industry and hinder long-term planning and growth. Business hates that sort of uncertainty.

More generally Trump’s tariffs will probably lead to inflationary pressures all round. As vehicle and other prices rise, consumers may face higher living costs, which could reduce disposable income and overall economic growth. The Reserve Bank of Australia may need to consider these factors when making decisions about interest rates and monetary policy.

With no domestic vehicle industry to protect there’s really no upside for Australia now that all our vehicles (with the exception of some trucks) are imported.

If Trump goes ahead with his protectionist tariffs they’re likely to have a big impact on Australia's vehicle market, leading to higher prices for imported vehicles, disruptions in supply chains, and broader economic implications.

Uncertain outlook

So, is the outlook all doom, gloom, and rising prices? Well not necessarily, because the only thing that’s predictable about Donald Trump’s Presidency is its unpredictability. It’s possible that his threatened tariffs are just that – a threat. And it’s equally possible that if he does introduce tariffs it will spark a massive backlash from some big and powerful business interests, and from ordinary voters themselves when the price of most things that they need suddenly jumps. “Buyer’s remorse” could set in quite quickly for Trump voters in the face of rising prices, forcing a rapid about-face from the “Commander in Chief”.

At this stage of the second Trump Presidency I’m reminded of that subtle old curse: “May you live in interesting times”. If nothing else this is certainly going to get interesting. Pass the popcorn.

As the global market shifts and changes, it’s more important than ever to make informed decisions about your next car. At Fleetcare, we make it easy to navigate these changes with novated leasing solutions that can help you save on costs.

Contact us today for a free quote and explore how a novated lease could work for you.

Written by
Mark Schneider

Mark is a successful copywriter with over 20 years of professional writing experience.

We welcome him as a guest blogger to Fleettorque.

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