Speaker 1: One day leftil Liberation Day. If you ask President Trump,
Speaker 1: you know his infatuation with tariffs goes back to the
Speaker 1: nineteen eighties when he said the word tariff is the
Speaker 1: most beautiful word in the dictionary.
Speaker 2: He said it many times since then as well.
Speaker 3: Wall Street journalists reporting the President Trump has settled on
Speaker 3: a plan for the latest batch of tariffs that are
Speaker 3: expected this week, but he's not telling anybody what that
Speaker 3: plan is.
Speaker 1: He has announced a twenty five percent tariff on all
Speaker 1: cars not made in the US, but exempted auto parts
Speaker 1: that comply with the US Mexico Canada agreement. To help
Speaker 1: US boil it all down. What it means for the
Speaker 1: labor industry, for the auto industry in this country is
Speaker 1: Arthur Wheaton. He's the director of Labor Studies at Cornell.
Speaker 1: Joins us now, Arthur, thank you so much for your
Speaker 1: time this morning.
Speaker 4: My pleasure.
Speaker 2: Let's start with some of the basics.
Speaker 3: You wrote a book a long time ago, or at
Speaker 3: least in an article where in the world to do
Speaker 3: they come from? Speaking of today's cars, and that was
Speaker 3: more than twenty years ago. We've talked a little bit
Speaker 3: about sort of the outsourcing of parts of transmissions of engines.
Speaker 3: When it comes to cars that are then assembled in
Speaker 3: the United States, where do our American finger quotes American
Speaker 3: cars come from these days?
Speaker 4: Well, the short answer is is there's no completely American car,
Speaker 4: So they all have parts coming from all around the world.
Speaker 4: And some of the most American content would be Tesla,
Speaker 4: and that's because their two main manufacturing plants for the
Speaker 4: US is here. But you're seeing almost half of all
Speaker 4: the vehicles sold in the US come from outside of
Speaker 4: the US.
Speaker 1: How does this affect the car companies who make the cars,
Speaker 1: like Toyota parts or the vehicles here in the US.
Speaker 4: It's a twenty five percent tiara on all of the
Speaker 4: vehicles coming from Japan from Toyota, and it's a twenty
Speaker 4: five percent tariff down the road for all of the
Speaker 4: auto parts that are sent to the United States to
Speaker 4: go into the Toyota vehicles. And it's a twenty five
Speaker 4: percent tariff for all of the other companies that build
Speaker 4: outside the US. The tricky part here is the parts,
Speaker 4: and those are going to be delayed by a month
Speaker 4: until they can figure out exactly how to precisely account
Speaker 4: for all the parts going back and forth across the borders.
Speaker 3: Transportation, car payments, truck payments, things like that are usually
Speaker 3: the second largest portion of a household's budget.
Speaker 2: Is this going to be an issue?
Speaker 3: Are we going to see immediate impacts on people's household
Speaker 3: budgets as a result of this.
Speaker 4: Absolutely, and there's almost no way to avoid it, because
Speaker 4: you're going to see people's budgets get squeezed. For new
Speaker 4: car prices, they're going to go up from the tariffs.
Speaker 4: Used car prices are going to go up because you're
Speaker 4: going to get priced out. For those that are just
Speaker 4: barely able to make those payments. Add twenty five percent
Speaker 4: on top of it, you won't be able to afford it.
Speaker 4: Rental car prices are going to go up, your car
Speaker 4: insurance is going to go up. All of those directly
Speaker 4: associated with the tariffs that are supposed to start the third.
Speaker 5: I remember in the nineties my mom got a used car.
Speaker 5: She loved it.
Speaker 1: It was used Alpha Romeo and she loved it because
Speaker 1: you know, its Italian. But then something went wrong with
Speaker 1: the car and you had to get the part from
Speaker 1: Italy and it was expensive and it took forever. And
Speaker 1: that was back when there was the push to buy
Speaker 1: American for that. One of one of the major reasons
Speaker 1: was for that alone, that you want your parts to
Speaker 1: get here and to be reasonable. But since then, it
Speaker 1: seems like there has been a globalized model that has developed.
Speaker 1: If we're going to bring back parts being made in
Speaker 1: the US, how long are we looking at And is
Speaker 1: that even something that's feasible with the way that this
Speaker 1: industry has diversified globally.
Speaker 4: Give enough money and enough time, yes, it's feasible you
Speaker 4: could bring that back. But what you would need to
Speaker 4: have is a long term, sustained tariff that people understand
Speaker 4: what the rules are. It's when you keep going on again,
Speaker 4: off again. No one wants to invest the billions of
Speaker 4: dollars to build a new plant and have two or
Speaker 4: three years for it to ramp up. If the next
Speaker 4: president comes in eliminates the tariffs and you just wasted
Speaker 4: a whole bunch of that money. So is it possible, yes?
Speaker 4: Is it going to take time? Absolutely? So you're talking
Speaker 4: about these plants can take three to five years to
Speaker 4: build and get the first product out the door, and
Speaker 4: by then Trump will no longer be president.
Speaker 3: Well, we've been fighting inflation and after the pandemic well,
Speaker 3: let me rephrase this. During the pandemic, we saw a
Speaker 3: lot of problems with the chokehold around supply chains, and
Speaker 3: that impacted the auto industry pretty significantly during the pandemic.
Speaker 3: Did we ever fully recover from that or we back
Speaker 3: to where we were before twenty twenty We are.
Speaker 4: Just now getting back with inventory levels, at least in
Speaker 4: the auto industry back up closer to what normal was.
Speaker 4: So there's going to be a little bit of a
Speaker 4: cushion before it hits US, but it was very disruptive
Speaker 4: for the supply chain. And you're going to see the
Speaker 4: same thing. Some of these parts going into that vehicle
Speaker 4: go back and forth across the border three or four
Speaker 4: times before the finished vehicle is sold, So you don't
Speaker 4: just pay the tariff lunch, you pay it each time
Speaker 4: it goes across the border. So it's going to be
Speaker 4: a huge impact for all of those and most of
Speaker 4: the vehicles in the US have at least twenty to
Speaker 4: fifty percent foreign parts that go in coming from outside
Speaker 4: the US.
Speaker 1: And then at what point do we talk about the
Speaker 1: potential for a government bailout of the American car companies
Speaker 1: if they are hit hard to the point of needing help, Well.
Speaker 4: We've done it more than once. We've done it at
Speaker 4: least a few times. For what's now called Stilantis used
Speaker 4: to be called Chrysler. They've been bailed out multiple times.
Speaker 4: But I think for the most part, you have different
Speaker 4: levels of pain. So Ford has eighty percent of their
Speaker 4: vehicles made in the US. The parts are going to
Speaker 4: become more expensive as they come back and forth across
Speaker 4: but Stillantis has a lot of their content and gender motors.
Speaker 4: Even more of their content susussible to US and Mexico.
Speaker 4: So the best are Canada and Mexico. The best hope
Speaker 4: is that they can negotiate some changes in what is
Speaker 4: or what is not covered by the tariffs, and that
Speaker 4: has been changing, so the USMCA, the NAFTA two point
Speaker 4: zero that President Trump negotiated in this previous administration, If
Speaker 4: they can maintain some of those conditions, it made less
Speaker 4: some of the impact from US, Mexico and Canada. But
Speaker 4: for right now, they're all on the hook.
Speaker 5: When you look at Asia, who needs who more?
Speaker 1: Do we need the parts that are made in Asia
Speaker 1: at the cost that they're made there more? Or do
Speaker 1: they need American consumers buying their vehicles and their parts more.
Speaker 4: I think it's a global dependence on each other. So
Speaker 4: I think they need us and I think we need them.
Speaker 4: But at some point in time, can China survive without
Speaker 4: the US market? Yes? They got more than a billion,
Speaker 4: four one hundred million people there, so yes, they have
Speaker 4: their own market. Can the US survive on their own? Yes?
Speaker 4: Will it cost us all more money, yes, but we
Speaker 4: can get by on our own. But it's a whole
Speaker 4: lot easier if we all work together.
Speaker 2: Art, great stuff. We really appreciate you taking time for
Speaker 2: us today.
Speaker 4: Thank you, my pleasure.
Speaker 3: You bet Arthur Wheaton there again, Director of Labor Studies
Speaker 3: at Cornell.
Speaker 2: You call them art, well, I hope that's why I
Speaker 2: did it.
Speaker 1: At the end, I didn't know if you near him
Speaker 1: because you called him Art like that's that's the next
Speaker 1: level relation.
Speaker 5: I mean, I guess we Art. We talked to him.
Speaker 5: You didn't call him Art right out of the gate.
Speaker 2: No, I waited. I warmed up right. I let him
Speaker 2: think we were friends.
Speaker 1: He could be one of those guys who's only been
Speaker 1: Arthur his whole life.
Speaker 3: Well, the article where we found him from Bloomberg, he
Speaker 3: went by Art. Oh good, I'm so glad I didn't
Speaker 3: break ice on that because I wanted to have him back.
Speaker 3: But if you offended him and burn that bridge. As
Speaker 3: we were saying goodbye. A little bit later in the show,
Speaker 3: we're going to talk about the the A's, not the well,
Speaker 3: the Sacramento A's and the drone that interrupted the games.
Speaker 1: Yes, so I saw pictures from that game, and it
Speaker 1: looked very much like spring training, which is really cool.
Speaker 1: It's the most expensive ticket, by the way, in Major
Speaker 1: League Baseball right now. Oh really, because there's only fourteen
Speaker 1: thousand seats.
Speaker 2: I get and it was packed. Yeah, I don't know
Speaker 2: what I mean. That was opening night, but it was.
Speaker 1: It looked very cool. It's a great ballpark there in
Speaker 1: West Sacramento. Hey, you like botox, you like Waygo V,
Speaker 1: you like zep bound, you don't like cancer. These are
Speaker 1: all drugs or active ingredients for these drugs that suppliers
Speaker 1: are shipping now by air to the United States because
Speaker 1: they're worried about tariffs on pharmaceuticals. EU medicine and pharmaceutical
Speaker 1: product exports to the US totaled about ninety billion euro
Speaker 1: about ninety seven billion dollars in twenty twenty three. Several
Speaker 1: investors and analysts following this whole deal say that well
Speaker 1: shares are already hurting, but there have actually been drug
Speaker 1: makers taking the unusual steps of sending medicines by air
Speaker 1: to the US just to get them here, just to
Speaker 1: get them here before the liberation day tomorrow. To your
Speaker 1: Headquartered drug makers told Reuters they're sending as much of
Speaker 1: their medicines across the Atlantic as possible. They've been doing
Speaker 1: over the past several weeks. They heard other pharmaceutical companies
Speaker 1: are doing the same.
Speaker 3: So on Friday, Trump said that the specific tariffs when
Speaker 3: it comes to pharmaceuticals would be coming soon. And part
Speaker 3: of the issue that has driven the markets crazy over
Speaker 3: these last few days and weeks is that there are
Speaker 3: no specifics about all of this just I mean, literally
Speaker 3: minutes ago. Caroline Levitt in the White House Press briefing said,
Speaker 3: the President has decided on all of these He's just
Speaker 3: not talent anybody yet.
Speaker 6: The President said last night he has made a decision
Speaker 6: in a determination. I was with him in the Oval
Speaker 6: Office earlier, and he is going to announce that decision tomorrow.
Speaker 6: I don't want to get ahead of the president this
Speaker 6: is obviously a very big day. He's with his trade
Speaker 6: and tariff team right now perfecting it to make sure
Speaker 6: this is a perfect deal for the American people and
Speaker 6: the American worker, and you will all find out in
Speaker 6: about twenty four hours from now.
Speaker 3: Yes, so about one o'clock I believe tomorrow is when
Speaker 3: the President's expected to make these announcements.
Speaker 1: Pharmaceutical products have long been spared from trade wars due
Speaker 1: to potential harms, right, we need those. But Trump's move
Speaker 1: to increase tariffs on goods from China, including finished drugs
Speaker 1: and raw ingredients, as well as the early round of
Speaker 1: tariffs on goods like steel and bourbon, has raised the
Speaker 1: expectations that medicines will join the list.
Speaker 3: I am it sounds a lot like the determination about
Speaker 3: how we're going to do these auto tariffs as well,
Speaker 3: whether it's the finished product or the ingredients, the main
Speaker 3: ingredients in them, or both or both. Trump had previously
Speaker 3: singled out Ireland specifically because apparently Ireland is home to
Speaker 3: manufacturing plants for most of the world's top ten pharmaceutical companies.
Speaker 5: Yeah, who knew. I just learned that this morning.
Speaker 3: So again, the details of it still hidden. Somewhere deep
Speaker 3: within the White House, and it turns out that President
Speaker 3: Trump has scheduled a news conference tomorrow to get into
Speaker 3: some of the details we had seen. For the most part,
Speaker 3: another down day on Wall Street because of the uncertainty
Speaker 3: that surrounds all of the all of the tariff decisions,
Speaker 3: and in fact, the announcement, significantly I mentioned, comes at
Speaker 3: one o'clock to one o'clock hour time, after the bell closes,
Speaker 3: after the markets close on Wall Street.
Speaker 1: Coming up next, we touched on the auto industry and
Speaker 1: the tariffs ahead for the auto industry. We're going to
Speaker 1: be talking to a senior editor at Kelly Bluebook and
Speaker 1: Auto Trader about what does this mean if you're in
Speaker 1: the market for a car, maybe you've got a used
Speaker 1: car on your hands. Is this a time to sell
Speaker 1: and to buy because of the uncertainty.
Speaker 3: Well, we're already concerned about inflation. There's some speculation, maybe
Speaker 3: some anxiety even about Liberation Day. When a bunch of
Speaker 3: tariffs are supposed to be imposed on stuff that's imported
Speaker 3: into the United States. One of those imports is going
Speaker 3: to be the price of cars is going to go up.
Speaker 3: I don't know how it couldn't joining us to talk
Speaker 3: more about this. Brian Moody is senior editor at Auto
Speaker 3: Trader in Kelly Bluebook. Brian, first of all, thanks for
Speaker 3: taking time and help us try to untangle some of
Speaker 3: what's about to happen to the economy.
Speaker 7: Yeah, of course, it's it's interesting the way this has
Speaker 7: moved all of a sudden. The automotive space has more
Speaker 7: new news than say the Hollywood Reporter.
Speaker 2: Well, listen, we don't.
Speaker 3: I think one of the issues about the tariffs is
Speaker 3: people are having a hard time kind of wrapping our.
Speaker 1: Heads around, well, do we do we buy now because
Speaker 1: we just don't know what's going to happen with the dealerships?
Speaker 1: Do we sell our used cars now because or do
Speaker 1: we wait because because those prices are going to go up?
Speaker 7: Right, the prices are going to go up. So here's
Speaker 7: the main thing that I would say. If you're looking
Speaker 7: for a used car, and for the purposes of this conversation,
Speaker 7: when I say used, I mean a lightly used car
Speaker 7: between five years old. If you're looking for a ten
Speaker 7: thousand dollars car with one hundred thousand miles or whatever,
Speaker 7: that's probably not going to change that much. It's the
Speaker 7: lightly used cars that, by the way, we're already in
Speaker 7: short supply because of the new cars that didn't get
Speaker 7: made during the pandemic. So if that's you, as a
Speaker 7: customer of a lightly used car, I would absolutely start
Speaker 7: looking right now.
Speaker 3: When it comes to the price increases that we do
Speaker 3: expect on imported cars with the ones that are I mean,
Speaker 3: it's hard to even explain this, but predominantly foreign vehicles,
Speaker 3: even though some of the parts may come from the
Speaker 3: United States, those prices are going to go up.
Speaker 2: Is there a specific.
Speaker 3: Segment of the car industry that we'll see more of
Speaker 3: an impact? Is it the higher price cars, the lower
Speaker 3: price cars?
Speaker 7: You know what's hard to It's not going to go
Speaker 7: by price, however, I say that, But what automakers may
Speaker 7: do is look at their entire PORTFOLI and say, hey,
Speaker 7: these inexpensive cars are built here in the US, and
Speaker 7: these priceier cars are built outside. They can't just raise
Speaker 7: prices on certain cars, not on the other They're going
Speaker 7: to try to even it out, get suppliers to chip in,
Speaker 7: but even it out across their model lines so that
Speaker 7: there's less of a sticker shock. So, for example, an
Speaker 7: economy car that costs twenty five thousand dollars simply can't
Speaker 7: support a three thousand dollars price increase, right, But a
Speaker 7: ninety thousand dollars pickup, if you add thirty five hundred
Speaker 7: dollars to that price, that customer probably can support that.
Speaker 7: And the other thing to remember is when we say
Speaker 7: import and domestic, the truth is many brands that we
Speaker 7: think of as imports, such as Honda, Nissan, Toyota, Mercedes Venz,
Speaker 7: those companies build their cars in the US for the
Speaker 7: most part. And on the other hand, a lot of
Speaker 7: domestic brands, not all, but they build many of their
Speaker 7: models outside the US, specifically Mexico or Canada.
Speaker 1: Do you see this global market? Ask you this question.
Speaker 1: It's become a global market. It's not as easy to
Speaker 1: say buy American anymore because of what you just mentioned.
Speaker 1: A lot of the parts are coming from other places.
Speaker 1: Do you see it being a situation where we could
Speaker 1: bring parts manufacturing back to this country primarily for American
Speaker 1: cars in our lifetime.
Speaker 7: It's possible, and some manufacturers are already doing that. For
Speaker 7: we see Tesla as a model for that. They make
Speaker 7: a lot of their cars in the US, and they
Speaker 7: also have a battery and power train facility inside the US,
Speaker 7: as does the Hyundai Motor Group. Hundai Motor Group solves
Speaker 7: the brands Hyundai, Kia, and Genesis, and they just built
Speaker 7: a new gigantic factory near Savannah, Georgia, but not only
Speaker 7: will manufacture cars for three brands, but also have an
Speaker 7: on site battery facility, So yes, that is possible. Nissan
Speaker 7: has an engine plant in Tennessee that also services vehicles,
Speaker 7: so yes, that's not uncommon.
Speaker 2: But we're hopefully.
Speaker 7: I mean, the whole goal of this is that you
Speaker 7: see more of that, But you know, this is all
Speaker 7: just speculation at the end of the day. Does any
Speaker 7: of that mean lower prices for consumers even five years
Speaker 7: from now? I really don't know.
Speaker 5: Is there a brand that you see faring better?
Speaker 7: A brand that has a diverse portfolio of cars made
Speaker 7: in multiple places will probably do better. Of course, we
Speaker 7: could say any brand where all the cars are made
Speaker 7: inside the US would be great. But the truth is,
Speaker 7: as you said before, parts come from their places. There
Speaker 7: really is no such thing as a one hundred percent
Speaker 7: inside the USA made car. So Tesla has lots of
Speaker 7: cars that come from the US. They probably would be Okay, Rivian,
Speaker 7: same thing. When you look at Nissan, they have a
Speaker 7: large number of cars made inside the US, but also
Speaker 7: some made outside the US. So those types of brands.
Speaker 7: Toyota makes many of the cars they sell in the
Speaker 7: US right here in the US.
Speaker 2: I want to ask you about Tesla specifically.
Speaker 3: Some critics of Elon Musk and the president have said
Speaker 3: that this was a favor to Tesla because it, like
Speaker 3: you said, does produce a lot of vehicles here in
Speaker 3: the US. But don't they also have factories in other
Speaker 3: parts of the world that specifically cater to those other
Speaker 3: parts of the world.
Speaker 7: Yeah, and that's the way that they've been doing business.
Speaker 7: So that's what's so odd about this is that for
Speaker 7: decades we've been sort of helping to orchestrate a system
Speaker 7: whereby manufacturers build where they sell. Now, they don't just
Speaker 7: sell cars in the US. There's a good chance that
Speaker 7: whatever car they sell in the US, they also sell
Speaker 7: in Mexico and South America. It only makes sense to
Speaker 7: centralize the location for building those cars for the purposes
Speaker 7: of a scale and also just economics. So yes, while
Speaker 7: one manufacturer like Bulbo or Tesla might make cars here
Speaker 7: in the US, they also make them other places to
Speaker 7: sell to those marks. And while it may advantage Tesla
Speaker 7: to have a tariff that only goes toward cars coming
Speaker 7: from outside the US, it would also advantage cars like
Speaker 7: the Ford Mustang GT, certain versions of the Jeep Wrangler,
Speaker 7: the Volkswagen ID four, as well as the Honda Odyssey,
Speaker 7: Honda Ridgeline, and other vehicles like that. Anybody who builds
Speaker 7: their cars inside the US. Kia is another one. It's
Speaker 7: going to help them. It wouldn't just only help Tesla.
Speaker 7: That would be silly.
Speaker 5: Brian, you drive a SOB.
Speaker 1: Any chance of the manual transmission making a comeback in
Speaker 1: this country.
Speaker 7: Nobody cares about that.
Speaker 5: I totally do. I miss the manual transmission.
Speaker 7: I know, because you know what you missed from not
Speaker 7: having a manual transmission. You you are required to be
Speaker 7: so focused on what's happening right in front of you.
Speaker 7: It's like you're forced to have a higher level of attention.
Speaker 7: I think all of these self driving programs are going
Speaker 7: to end up being harmful in the end.
Speaker 5: Yes.
Speaker 7: So, while I can brag that I got my daughter
Speaker 7: to be embraced sobs and she has one of those too,
Speaker 7: I fear I'm going to be one of the only
Speaker 7: few people like that in my neighborhood for many years
Speaker 7: to come.
Speaker 3: Well, Mike, both of my kids learned on the stick
Speaker 3: and I can't. It's one of the greatest gifts I
Speaker 3: think that my wife and I gave our kids is
Speaker 3: the ability to drive a manual transmission.
Speaker 7: Yes, and it also I've noticed something in teaching kids
Speaker 7: to drive, Like sometimes at work will have an intern
Speaker 7: and they'll say, oh, well, I want how to drive
Speaker 7: a stick shift, And when you teach them, they'll say
Speaker 7: things like this, how does the car no one to
Speaker 7: stop when you push in the clutch.
Speaker 4: And you're like, oh, my gosh, you know we got
Speaker 4: a switch.
Speaker 2: Oh man, I have.
Speaker 7: A connection with the physical world, the way we turn
Speaker 7: our bikes upside down and put dirt on there and
Speaker 7: change the tires. They don't have that connection with the
Speaker 7: girl they learned to drive on video games.
Speaker 5: Honestly, God, that's suppressing. Brian, Thank you.
Speaker 7: Thank you.
Speaker 3: Brian Moody, their senior editor at Auto Trader and Kelly
Speaker 3: blue Book