Blog

Short blog posts, journal entries, and random thoughts. Topics include a mix of personal and the world at large. 

Trump threatens Germany with car tariffs

People in the car forums I frequent are up in arms about President Trump potentially slapping a 20% tariff on German-made vehicles. Rightfully so because who would want to pay 20% more on already expensive German cars. Though I think if tariffs were enacted the situation won’t be that simple. 

Contrary to popular conjecture, people who can afford luxury vehicles are highly price sensitive. They haggle just the same as buyers of Toyota Camrys. Even the super rich would setup LLCs in Montana, register their vehicles under the company to avoid paying hefty license fees in their home State. Bottom line is that nobody wants to pay a penny more for a car than absolute necessary. 

Therefore if Trump imposes the 20% tariff, automakers like Mercedes, Audi, and BMW aren’t going to suddenly raise the MSRP of their cars by equal measure - doing so would crater sales (simple price elasticity). Not only will higher prices be a deterrent, but consumers know that it’s because of tariffs so one they aren’t going to pay extra for the President’s stupid trade-war and two they will simply wait it out until the two sides come to an agreement. 

I think the manufactures will raise the prices a bit just below what people are sensitive to, and then eat the rest of the costs for the time being - they’ve certainly made enough profits from selling SUVs the last few years to cover. Nevertheless it’s going to negatively affect the bottom line and the German government will be lobbied heavily to mediate. 

One thing is for sure: more people aren’t going to start buying Cadillac or Lincoln. 

 A certified G, and a bona fide stud. 

A certified G, and a bona fide stud.