How and When Steel Tariffs will Increase Prices at the Car Dealer

More than 1,000 automotive industry leaders are in Traverse City this week for the Center for Automotive Research conference, and a huge topic of discussion for the automotive industry is steel tariffs.

It’s costing car manufacturers and suppliers a lot of money, but how will that impact car buyers? When will people on the hunt for a new ride see that price tag go up at the dealer?

Let’s back up and review some background on the steel tariffs.

In March, President Trump signed an order that included a 25 percent tax on imported steel. That went into effect just last month, and now automakers are running into a number of costly problems.

“Steel is a significant portion of the car, and the price…700 or 800 dollars’ worth goes into the vehicle,” said Dr. Prakash Sathe, a professor at the University of Michigan and the Vice President at Rapid Global Business Solutions Inc.

Many car buyers get their steel internationally.

“Obviously, when you have a steel intensive vehicle, you’re paying a lot for your products,” said Lindsay Brookes, an automotive journalist. “Everyone is being affected by [the tariffs].”

With foreign steel costing manufacturers more, part of the strategy is to encourage suppliers to buy American steel. But shopping domestically isn’t quite as simple as it sounds.

Mike Omotoso is the business development manager at Dayco, which creates parts for cars. His parts are made of steel.

“The domestic suppliers are competing with 25-percent tariffs, so they’re able to raise their prices as well,” said Omotoso. “So really, there’s no way to get cheap steel under this new regime that we have.”

We know steel is costing car manufacturers more right now, but how soon will we see a price increase for consumers? Maybe in a few months.

“I’m sure the launch of the 2019 models in September, October, around that time, you’ll start seeing an impact,” said Sathe. “With that timeline, you need to decide when to buy.”

It’s a consideration of when to buy and what to buy. Automotive experts say luxury cars and imports will cost more to consumers, although every car brand is feeling the squeeze from steel tariffs.

“The price rise might be the difference between you opting for a certain feature in the vehicle and paying a little bit more,” said automotive journalist Lindsay Brookes. “[The price increase] is not going to be enormous, but there will be an effect on the bottom line. You will not see the impact immediately but sooner or later.”

Many automotive industry employees told 9&10 that they just hope the tariffs can be reduced.

“We hope that the situation can be resolved soon, when the overall impact is seen,” said Omotoso.