WASHINGTON, D.C. – A 25 percent tariff on foreign cars and parts took effect today, sparking debate among economists and officials about its potential impact on the U.S. economy. While President Donald Trump acknowledges tariffs will increase consumer costs, he believes they will ultimately bolster American manufacturing.
Columbia Business School professor Dr. Rita McGrath concedes America paid a price for free trade.
“The unintended consequences were free trade basically lowered wages across the globe, so high paid manufacturing jobs in America got hollowed out only to be replaced by labor from elsewhere.” said Dr. McGrath.
President Trump aims to discourage imports and revive U.S. manufacturing through the tariffs. “Whatever they charge us we charge them,” Trump said during a Tuesday press conference.
However, Brad McAreavy, president of the Rochester Automobile Dealers Association, expressed skepticism about the tariffs’ effectiveness. He said, “The auto industry is a worldwide industry supply chain. It’s a worldwide manufacturing operation.”
McAreavy believes that while bringing auto manufacturing back to America is a worthy goal, it is unlikely. “The auto industry from an auto manufacturing standpoint is a long-range planning business,” he said, noting that significant changes would take years to implement.
Dr. McGrath warns that the tariffs could lead spark inflation and ultimately hurt the U.S. economy. “We’re running the risk of the 1970’s stagflation in which you had inflation without corresponding economic growth,” she said.
Supporters of tariffs highlight Honda’s decision to build its next plant in Indiana instead of Mexico to avoid U.S. tariffs. However, economists remain skeptical, arguing that it would take years to see results, and that new American plants would only account for about 10 percent of the auto supply chain.
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