Border tax could hurt U.S. auto industry, raise car prices by up to $4,000
Imposing a border adjustment tax (BAT) could hurt the U.S. auto industry, even while likely failing to achieve its goal of reversing offshore manufacturing to low-cost countries. Those are the findings of a new study commissioned by the Motor & Equipment Manufacturers Association (MEMA) and conducted by the Boston Consulting Group.
Car prices, vehicle sales, supply chain decisions and industry employment could all be hurt by the proposals.
Vitality in the motor vehicle sector hinges on a globally integrated supply chain, said Xavier Mosquet, lead author of the study.
The proposed BAT would be part of corporate tax reform and would be critical in paying to cut corporate taxes 15 to 20 percent. Companies would pay at least a 15 percent tax on imports but would pay no business tax on their exports. Under a 15 percent BAT, the study found that U.S. automakers would pay $34 billion in import taxes while realizing only $12 billion in export benefits. This translates to an average $1,000 increase in per-vehicle manufacturing costs at the top 12 OEMs selling cars in the U.S.
The cost for individual automakers depends on the type of vehicles they make, sales mix, price range and factory location. The increase in sticker price from a BAT would range from $450 to $4,000 per vehicle. To be able to afford a car, consumers would likely forgo some features including advanced safety and driver-assist technology, like rearview cameras and automatic braking and parking, the study found.Download Bulletin PDF