Analyst: 25% tariffs could cause ‘Cubanization’ of American car ownership
Have you ever watched a travel show about Cuba? Better yet, maybe you’ve visited. If you have, you’ve likely noticed that Cubans have a seemingly disproportionate number of classic cars still running and driving. Not as weekend toys, but as practical transportation. Well, one industry analyst maintains that proposed tariffs could force Americans to do the same. Namely, keep and maintain their older cars as new cars get prohibitively expensive.
An auto industry analyst with Morgan Stanley asserts that tariffs might force Americans to take the Cuban approach
In March, US President Donald Trump proposed 25% tariffs for all foreign vehicle imports. His intent? Rebalance global trade and prompt the production of vehicles here in the United States. But there are a few problems with using tariffs as a weapon in the global automotive market. For starters, in the era of Globalization, there’s really no such thing as a fully American-built car.
Granted, vehicles like the Tesla Model 3 and Honda Ridgeline will escape the 25% tariffs due to American final assembly. However, those two vehicles, some of the “most American” on the market, top out at around 75% US and Canadian parts. With tariffs impacting new cars and parts, maintenance and repair of current vehicles will be pricier, regardless of vehicle origin.
That’s not all. Morgan Stanley auto industry analyst Adam Jonas says tariffs will raise the price of all new cars and force Americans to rethink things over time. “”If truly ‘permanent,’ a 25% tariff on all imports into the U.S. market would represent a significant increase in the prices of cars, effectively inflating the average price of a vehicle by 11% or 12% and raising the average monthly auto loan payment from approximately $750/month to $830 or $840/month,” Jonas said.
In the long term, Jonas says that tariffs may prompt Americans to rethink ownership. A “Cubanization” of vehicles may take hold as the prices of new cars rise across the board, per USA Today. No, Jonas doesn’t mean flags and blood-pumping Salsa music. He’s referring to the well-documented tendency of Cuban car owners over the decades to keep and maintain their old cars.
The United States famously embargoed Cuba in the late 1950s. As a result, Fidel Castro banned the importation of new cars from America. The result? Cuba is practically brimming with classic and antique cars kept running out of necessity. Jonas maintains that the added expense of new cars might prompt Americans to do something of the same.
