Pickup Trucks Are Probably Going To Get Way More Expensive, Which Seems Bad To Me

I was studying the Book of Job last night when I got a call from someone who works at a major automaker, hoping to provide some information, on background, about the impacts of tariffs for his employer. It was great to hear from this person, but it wasn’t a helpful call. No one knows anything, really, and so I went back to Job.

The Morning Dump today will not be as long or as enlightening as Job, which is probably the most misunderstood book of the Old Testament (the South Park episode “Cartmanland” is a quicker, easier take on it, though I think it sugarcoats the ending). If you’ve never read it, you’d get the idea from popular culture that God makes a wager with Satan to see how much one seemingly devout guy can be punished before he breaks and curses God, and instead of breaking, Job patiently waits for God to make it right. That’s not quite what happens. Instead, Job’s friends come to visit him and slowly start to insinuate that maybe Job did something wrong to deserve this treatment, with Job slowly starting to realize that his friends are actually more torture than the sores that cover him from head to toe. And rather than patiently waiting, Job instead begins to loudly complain and proclaim that it would be better if he had never been born. As God predicted, Job never curses him directly, though he does question the logic of what’s happening to him for most of the book.

In the end, God swoops in, restores Job’s health and family, and chastises everyone, especially the friends, for assuming they’re able to reason out why bad stuff, or good stuff, really happens. I find this deeply comforting, especially now. I’m not sure why all this is happening, I’m not sure what the end game is here, and I take some comfort in knowing that those who claim to be sure are going to be judged more harshly than those who can admit they’re unsure.

My sense, and it’s only a sense, is that all of this is one big bargaining chip and that awful short-term outcomes are going to so outweigh the potential long-term upside that there’s little chance we’re in for a long and protracted period of tariffs. Part of this stems from the fact that they don’t currently make a lot of sense, and the rest from questions around enforceability and desire, on the part of the President, to make things like pickup trucks more expensive.

I could be wrong. I am mortal. So I’ll look at who might win and who might lose, starting with the losers and ending with the winners. Since this can’t all be directly about tariffs, I’ll talk some about lease buyouts. That’s interesting.

‘Consumers Will Be Losers’ According To One Analyst

In Job, it’s said that God “enlarges nations, then leads them away” and “strips understanding from the leaders of the earth, and makes them wander in a pathless waste.” If you’re an automaker right now, or someone planning to buy a car, you might relate to that.

But let’s start with what the proclamation from The White House actually says. It’s titled “ADJUSTING IMPORTS OF AUTOMOBILES AND AUTOMOBILE PARTS INTO THE UNITED STATES” which is a very chill way of saying that the tariffs on cars, which were coming then not coming, are going to happen in some form.

Specifically, a 25% tariff is going into place on any vehicle sold in the United States that was built anywhere else, although there’s maybe a carveout for cars built in Canada and Mexico that comply with the United States-Mexico-Canada Agreement, although only to parts made or transformed in the United States.

Why is this happening?

The Secretary has informed me that, since the February 17, 2019, report, the national security concerns remain and have escalated. The COVID-19 pandemic exposed critical vulnerabilities and choke points in global supply chains, undermining our ability to maintain a resilient domestic industrial base. In recent years, American-owned automotive manufacturers have experienced numerous supply chain challenges, including material and parts input shortages, labor shortages and strikes, and electrical-component shortages. Meanwhile, foreign automotive industries, propelled by unfair subsidies and aggressive industrial policies, have grown substantially. Today, only about half of the vehicles sold in the United States are manufactured domestically, a decline that jeopardizes our domestic industrial base and national security, and the United States’ share of worldwide automobile production has remained stagnant since the February 17, 2019, report. The number of employees in the domestic automotive industry has also not improved since the February 17, 2019, report.

I am also advised that agreements entered into before the issuance of Proclamation 9888, such as the revisions to the United States-Korea Free Trade Agreement and the United States-Mexico-Canada Agreement (USMCA), have not yielded sufficient positive outcomes.  The threat to national security posed by imports of automobiles and certain automobile parts remains and has increased.  Investments resulting from other efforts, such as legislation, have also not yielded sufficient positive outcomes to eliminate the threat to national security from such imports.

If at first you don’t succeed, try and try again, I suppose, since President Trump is the one who was responsible for negotiating both the USMCA and revisions to the United States-Korea Free Trade Agreement in his first term.

It’s fairly bipartisan to say that America needs a larger manufacturing base, that supply chains have become comically overstretched, and that more jobs are a good thing. If cheap goods for many and high profits for some at the cost of a lot of employment were the result of liberalizing trade in the ’90s, then perhaps there’s some justice to un-liberalizing trade so that those jobs can come back. It’s possible that some combination of high tariffs bringing in income, more jobs, et cetera lead to enough economic growth to counter the costs, but that’s rarely how it goes.

If you’re not into the Book of Job, Ben Stein in Ferris Bueller’s Day Off does a nice job of reminding everyone what happened last time America set forth to do these kinds of tariffs at this sort of scale.

“In 1930, the Republican-controlled House of Representatives, in an effort to alleviate the effects of the… Anyone? Anyone?… the Great Depression, passed the… Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act. Which, anyone? Raised or lowered?… raised tariffs, in an effort to collect more revenue for the federal government. Did it work? Anyone?… Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression.”

Maybe it’ll work this time!

[Ed Note: There’s no way Matt is referencing Ferris Bueller’s Day Off as a source about tariffs, right? This cannot possi — oh wow. Holy crap:

Oh man that’s hilarious. -DT]. 

The impacts, whenever they happen, could be immediate, and the people who claim to know think it’ll be bad for some and less-bad for others. From Bloomberg:

“There are very few winners,” Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions, said in a telephone interview. “Consumers will be losers because they will have reduced choice and higher prices.”

Tesla is the “least exposed” to the new duties due to its domestic manufacturing operations, CFRA Research analyst Garrett Nelson wrote in an analysis this week. Tesla itself has been boasting this week about its US credentials, saying in a post on X that its models “are the most American-made cars.”

Ford Motor Co. could also face a less-severe impact than some rivals, with about 80% of the cars it sells in the US being built domestically.

In particular, and this should be obvious, it’s bad for the automakers that import cars into the United States. Porsche imports all of its cars. Even domestic brands like Buick, which have been performing well, import 100% of their cars. Volvo, Mazda, and Volkswagen bring in a huge percentage of their cars.

They’re worried, and probably should be. Porsche, in particular, is in a tough spot, as mentioned in a different Bloomberg article:

Porsche, which is struggling with lower sales in China, may be most exposed. The luxury-car maker has steadily grown the last 15 years in the US, which just overtook China as its top market. But Porsche’s US dealers are entirely reliant on imports as the manufacturer operates no factory there.

The group I want to focus on is truck buyers, as they’re the worst off here. In spite of the existence of the Chicken Tax, which is a 25% tariff on imported light trucks, many of the trucks people like to buy are not, in fact, built in the United States.

Ford builds its F-150s, Super Duty trucks, and Rangers in the United States. While material costs and supplies may go up, impacting the total cost of the vehicle, it seems a lot more insulated than the big trucks from other companies. The Maverick, unfortunately, is built in Mexico. Sorry, Maverick buyers.

It gets a little harder for General Motors. The Colorado is built in Missouri, and most Silverados and HD Silverados are assembled in the United States, but facilities in Canada and Mexico make up the difference, and suppliers in those countries provide key components.

Stellantis is in the worst shape here, as its light-duty trucks are made in the United States and, yet, all of its heavy-duty trucks we just reviewed are made in Mexico. This production can eventually be shipped to the United States, assuming there’s enough labor. Of course, labor here is more expensive, so that’ll also make prices likely go up.

Toyota? Thanks to the Chicken Tax, Toyota builds all of its Tundras and some of its Tacomas here, so you’re in the clear. The same is true for the Hyundai Santa Cruz and Honda Ridgeline. No one wanted the Nissan Titan, so it’s being discontinued, but the Frontier will continue to be built here, so that’s nice. Tesla only builds the Cybertruck in the United States, partially because it would be illegal to sell something so risky to pedestrians in other places, so the Cybertruck might remain the same price.

It’s an interesting situation we’re in, where the Ford Maverick, Chevy Silverado, and Ram 2500 are likely to become relatively more expensive while the Toyota Tundra, Nissan Frontier, and Hyundai Santa Cruz probably become net cheaper. I say all of this is relative, because it’s possible everything goes up in price because all of the supply chains are integrated across borders and, as we learned during the pandemic, you can’t just fix that overnight.

This makes me tempted to believe that, as in the past, all of this is short-term negotiating. President Trump already said he’d consider cutting different tariffs on China, for instance, if they’ll sell ByteDance to an American company.

But I don’t know. No one knows. How many loopholes all there? Will Hyundai get one after going to the White House and bragging about building more plants here?

The UAW Seems Pretty Happy About It

United Auto Workers President Shawn Fain and then-candidate Donald Trump spent about a year taking potshots at one another, with the UAW ultimately endorsing VP Kamala Harris. If there’s one person who is happy with all of this, at least for now, it’s Shawn Fain.

Here is the UAW’s statement on the announcement:

“We applaud the Trump administration for stepping up to end the free trade disaster that has devastated working-class communities for decades. Ending the race to the bottom in the auto industry starts with fixing our broken trade deals, and the Trump administration has made history with today’s actions.

But ending the race to the bottom also means securing union rights for autoworkers everywhere with a strong National Labor Relations Board, a decent retirement with Social Security benefits protected, healthcare for all workers including through Medicare and Medicaid, and dignity on and off the job. The UAW and the working class, in general, couldn’t care less about party politics; working people expect leaders to work together to deliver results. The UAW has been clear: we will work with any politician, regardless of party, who is willing to reverse decades of working-class people going backwards in the most profitable times in our nation’s history. These tariffs are a major step in the right direction for autoworkers and blue-collar communities across the country, and it is now on the automakers, from the Big Three to Volkswagen and beyond, to bring back good union jobs to the U.S.”

I’m not sure President Trump and Fain are on the same page about Medicare, Medicaid, a strong NLRB, or Social Security. Nor is it clear that President Trump’s hope here is to see a bunch of unionized car plants.

If we fast-forward to the future, in a world where more cars are built here and costs go up, the result could end up being more automation. I don’t see another obvious way to square all of this.

People Are Seeing The Logic Of Buying Out Their Leases

Earlier this month, I wrote about the lease renewal cliff, which is the moment when a bunch of cars that would normally enter the used market do not. The reason is that most leases are for 2-3 years ago, and 2-3 years ago, there weren’t that many new cars to lease because of the pandemic.

The only thing that could make this situation worse, I reckoned, was a bunch of people looking at the current environment and deciding it might be better off to just buy out their lease. Conveniently, the people at Lease End, a company that helps people buy out their leases, have some data on this that they agreed to share.

“Lease End has seen a significant increase in lease buyouts year-over-year. In 2022, we facilitated 4,774 lease buyouts. That number grew to 7,766 in 2023, and in 2024, we processed 14,235 lease buyout transactions—an increase of 83% compared to the previous year,” said co-founder Zander Cook.

Why is this happening?

“We believe this surge is driven by a combination of factors, including (but not limited to) market conditions, consumer preferences shifting toward lease buyouts, and greater awareness of the options available — including brand awareness.”

As Cook admits, some of this might be due to the fact that Lease End is a new and growing company, but market forces are certainly at play here. If your vehicle is suddenly worth a lot less at the end of your lease, there’s less of a reason to buy it out, but if you’ve got positive equity, it might make sense. In fact, a study from Lease End showed that all of the top ten most popular vehicles to buy out had positive equity, with an average minimum of at least $2,000.

If cars get way, way more expensive and consumers have an ability to buy out their lease, this could make buy-outs more popular. This is not great for car dealers, who want the used cars to sell, and it’s worse for used car buyers, who might be looking towards used cars when new cars become more affordable.

Bring on the Lease Renewal Super Cliff.

What I’m Listening To While Writing TMD

It’s the last day of me talking about Laura Nyro without actually playing a song that Laura Nyro is actively singing, and this time it’s from the composer and lyricist Stephen Schwartz. I was thinking of doing something from Godspell this morning, tbh, before worrying that was maybe too on the nose. Instead, here’s “Magic To Do” from Pippin. It’s extremely Nyro-esque and kinda fun. I’m more of a Sondheim guy, but it works in a pinch.

The Big Question

What now?