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NEW YORK DAWN™ > Blog > Politics > Famous economist honored by Trump warns his 25% tariffs may add $4,711 to the price of a automobile
Famous economist honored by Trump warns his 25% tariffs may add ,711 to the price of a automobile
Politics

Famous economist honored by Trump warns his 25% tariffs may add $4,711 to the price of a automobile

Last updated: March 28, 2025 5:35 pm
Editorial Board Published March 28, 2025
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By JOSH BOAK, Related Press

WASHINGTON (AP) — Famous economist Arthur Laffer warns in a brand new evaluation that President Donald Trump’s 25% tariffs on auto imports may add $4,711 to the price of a automobile and says the proposed taxes may weaken the power of U.S. automakers to compete with their overseas counterparts.

Within the 21-page evaluation obtained by The Related Press, Laffer, whom Trump awarded the Presidential Medal of Freedom in 2019 for his contributions to economics, says the auto business could be in a greater place if the Republican president preserved the provision chain guidelines with Canada and Mexico from his personal 2019 USMCA commerce pact.

The White Home has briefly exempted auto and elements imports underneath the USMCA from the tariffs beginning on April 3 in order that the Trump administration can put collectively a course of for taxing non-U.S. content material in autos and elements that fall underneath the settlement.

“Without this exemption, the proposed tariff risks causing irreparable damage to the industry, contradicting the administration’s goals of strengthening U.S. manufacturing and economic stability,” Laffer writes within the evaluation. “A 25% tariff would not only shrink, or possibly eliminate, profit margins for U.S. manufacturers but also weaken their ability to compete with international rivals.”

In a Friday interview with The Related Press, Laffer stated the report had induced a “kerfuffle” and cautioned that it solely utilized to the economics, fairly than Trump’s negotiating expertise and strategic method to commerce.

“The report shows the economics of what would happen were the tariffs to be put in place,” he stated. “This is about facts, not how we feel.”

The economist was fast to additionally reward Trump as a negotiator who has deep data of commerce points, indicating that the tariff threats might be used as they’d throughout Trump’s first time period to in the end decrease limitations to commerce and enhance outcomes for the U.S. financial system.

“Donald Trump is more familiar with the gains from trade than any politician I’ve ever talked to in my life,” Laffer stated. ”Don’t take this paper in any approach, form or type as criticizing Donald Trump and what his methods are.”

He added that he trusts the president and sees him as exceptionally competent.

Whereas Trump’s tariff plans have frightened the inventory market and U.S. shoppers, Laffer’s evaluation and different reviews present the attainable financial dangers if the specter of import taxes is unable to supply a sturdy set of offers with different nations. The paper reminds Trump that it’s not too late to alter course, particularly complimenting the USMCA negotiated in his first time period as a “significant achievement.”

“The United States-Mexico-Canada Agreement (USMCA) has served as a cornerstone of President Trump’s first term and has quickly become a dominant feature of North American trade policy, fostering economic growth, stabilizing supply chains, and strengthening the U.S. auto industry,” Laffer writes.

The evaluation says that the per automobile value with out the USMCA exemption could be $4,711, however that determine could be a decrease $2,765 if the exemptions have been sustained.

Trump honored Laffer with the very best civilian honor 45 years after the economist famously sketched out on a serviette the Laffer curve, displaying that there’s an optimum tax price for amassing income.

The bell-shaped curve indicated that there’s a tax price so excessive that it might be self-defeating for producing tax revenues. Many Republicans embraced the curve as proof that decrease tax charges may generate stronger development that might result in larger tax revenues.

“Dr. Laffer helped inspire, guide, and implement extraordinary economic reforms that recognize the power of human freedom and ingenuity to grow our economy and lift families out of poverty and into a really bright future,” Trump stated in awarding him the medal.

Laffer served on the financial coverage advisory board of President Ronald Reagan, along with being a college professor. He has his personal financial consultancy, Laffer Associates. In 1970, he was the primary chief economist of the White Home Workplace of Administration and Finances.

Laffer additionally suggested Trump throughout his 2016 presidential marketing campaign and co-wrote a flattering ebook, “Trumponomics: Inside the America First Plan to Revive Our Economy.”

Trump maintains that 25% tariffs will trigger extra overseas and home automakers to broaden manufacturing and open new factories in the US. On Monday, he celebrated a deliberate $5.8 billion funding by South Korean automaker Hyundai to construct a metal plant in Louisiana as proof that his technique would succeed.

Trump stated the 25% auto tariffs would assist to cut back the federal finances deficit whereas transferring extra manufacturing into the US.

“For the most part, I think it’s going to lead cars to be made in one location,” Trump informed reporters on Wednesday. “For right now, the car would be made here, sent to Canada, sent to Mexico, sent to all over the place. It’s ridiculous.”

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