Bugatti Importers Unite With Insurers Against U.S. Auto Tariffs

(Bloomberg) -- More than 2,300 comments flooded the U.S. Commerce Department when it solicited public input on its investigation into whether auto imports pose a threat to national security. Buried among the doom and gloom predicted by automakers and their parts suppliers are an assortment of anxieties about unintended consequences from the edges of the industry.

Here are some of the most interesting second- and third-order aftereffects of the tariffs the Trump administration is mulling on automobiles and car parts:

Classic Car Collectors

The business of vintage cars is a $160 billion industry employing dealers, auction houses, parts manufacturers, insurers, customs brokers, restoration shops and trucking companies. Mark Hyman, owner of St. Louis, Missouri-based dealer Hyman Ltd., warns that vehicle values would collapse if President Donald Trump were to implement 25 percent import tariffs.

Hyman said that, at peak, 70 percent of his business is imported cars. He recently took delivery of a 1934 Bugatti Type 57 worth $1 million. With the additional levy Trump is said to be considering, import duties on the same vehicle would surge to $250,000, from $25,000. That’ll affect the amount of money prospective U.S. buyers will be willing to pay for cars located outside the country, he said.

Auto Insurers

Car insurers warn the import tariffs may drive up premiums by boosting claim costs, as parts to repair foreign vehicles will get more expensive and be harder to come by.

Consumers could end up getting hit with $3.4 billion in higher premiums, according to industry trade groups. They also warn of other potential knock-on effects: more car thefts, with thieves motivated to rip off scarcely available components; drivers forgoing repairs because those would cost more than the value of their cars, spurring safety issues; and a lack of competition among suppliers that could lead to both pricier and lower-quality parts.

Small Manufacturers

One group Commerce may have thought it could count on to speak up in favor of the probe are smaller companies that make precision tools and metal parts, which are facing stiff competition from overseas foes.

Instead, these companies say they’re already being squeezed by steel and aluminum tariffs, and warn they’re at risk of losing more business. Overseas customers are opting for local suppliers to avoid the uncertainty around U.S. trade policy, according to OneVoice, a trade group representing tooling, machining and metal-forming companies that employ about 2.6 million people, with an average of 50 employees in each shop.

©2018 Bloomberg L.P.