CUNA Senior Economist Samira Salem appeared on CU Broadcast this week to discuss CUNA’s new data on how tariffs will affect the auto industry and credit unions. President Donald Trump has enacted a series of tariffs on products around the world, including steel and aluminum (Update: see editor’s note below).
While Salem said the effects are limited now, with tariffs affecting approximately 4% of important goods, if the number grows it could have a significant impact.
She explained how the metal tariffs could impact automobile production, and since even domestic cars are made with at least some imported parts, they could feel the impact as well.
“All the estimates we’re seeing look at the impact of a worst-case scenario of 25% tariffs across the board,” Salem said. “We don’t know if or when that would happen. But what we’ve seen is that there are estimates out there, so what would that worst-case scenario look like in terms of new car sales?”
The Center for Automotive Research estimates there could be an annual decrease of two million cars sold, taken from the approximately 17.5 million sold annually now.
“We came to an estimate, a decrease of almost 800 [thousand] new vehicles, in terms of new auto loan originations. In our rough estimate of all loan originations, automobiles count for about a third. So it’s a nice chunk of credit union business,” she said. “What that means, depending on the estimate you’re using, is there will be a decrease of between $16 million and $24 million in new auto loan balances.
“If you take that, and think about outstanding loan balances, that’s about 12% to 13% of total outstanding loan balances,” she added.
Salem also noted that these estimates don’t factor in consumer changes, such as an increased proportion of used auto loans, nor does it account for any adjustment in practices or supply chain by automobile manufacturers.
Salem said she has seen estimates of imported vehicles going up by $4,400, and domestic vehicles going up by $2,200 because of imported parts, and added it’s common for these costs to get passed along to consumers.
Editor’s note: Since the interview was conducted, the Trump administration has negotiated the U.S.-Mexico-Canada Agreement, which if enacted will significantly decreases the impact of the threatened tariffs on the auto industry and in turn, credit unions, Salem told CUNA News.