This is shaping up to be the third major global financial crisis of my professional life, which feels like two too many. [Editor’s note: I think it’s telling that Matt feels there’s at least one global financial crisis to be expected in one’s professional life – JT] There’s an idea that this one is different because it’s self-inflicted and not caused by some exogenous event, like the pandemic. I don’t entirely buy this because the first one also felt like a man-made event. How do I know? My first job out of college was working in the mortgage-backed securities (MBS) market.
If this is your first time reading The Morning Dump, I feel like this little bit of prologue is helpful in judging anything I might say. It was 2005 and the job market was showing weakness, so I took the first position I was offered at a firm that did third-party due diligence for large commercial MBS deals. These deals were happening so fast that the banks outsourced the job of proving they were legit to companies like the one I worked for, and my company was doing this analysis so quickly that it hired a small internal team to help produce the research.
It quickly became obvious to me and my girlfriend, who also worked there, that while any individual deal analysis made sense, that, taken together, any slip in the market would likely be catastrophic given all the underlying assumptions. I remember when the so-called elite bankers came down from [redacted] to visit our offices. They were barely older than I was, and I don’t remember a single one of them saying anything smart. By day two, they were mostly just hungover and ranking strip clubs instead of tranches.
While it was the comically overleveraged residential MBS market that took down the economy, the collapse of the commercial MBS market didn’t help. My girlfriend and I both found other jobs before the collapse happened, which is why I do this. It didn’t even occur to me at the time that there was a way to make money off the collapse, as they did in The Big Short, which is all to say that you should take anything I say with an enormous grain of salt.
This is a car site, anyway, and so I’m going to talk about cars. It would be nice to think that, if the markets continue to implode and we drop into a recession, which is a real possibility according to a recent CNBC survey, car prices would come down. Unfortunately, that’s not a given this time.
I’m going to start this morning with what happened the last two times we experienced a global financial crisis and why car prices were only briefly cheaper, which is what I think is going to happen this time. Why? A new analysis shows that most of the cheap cars you might want aren’t built here, and building them here might make them more expensive.
That isn’t to say that all the cheap cars are built elsewhere. Nissan might be shifting Rogue production here as automakers try to get around tariffs, though that isn’t a guarantee that we’ll suddenly get a huge increase in production, at least based on some other signs.
And, finally, even if production does shift here, even the mastermind of the trade war admitted this weekend that it’s going to have to be robots building things if we can to keep prices down, which is also what I’m hearing murmurs of from automakers.
Why A Global Crisis Doesn’t Make Cars Cheaper
Above is a great graph from the St. Louis Federal Reserve Bank showing the Consumer Price Index for All Urban Consumers: New Vehicles in U.S. City Average. This covers 90% of the total population of the United States, and when the line goes up, people are paying more for cars, and when it goes down, they’re paying less. The little gray bits are the bad times. You can see the pandemic in 2020 and the Great Recession in 2008.
What’s interesting about this graphic is that the bad times don’t really line up with huge negative price shocks. You can see that cars got a little cheaper during the Great Recession and, briefly, stayed flat early in the pandemic. The expansion of the economy during the early Obama-era recovery, a shift in tastes away from sedans towards more expensive crossovers, and the reduction in used car inventory following Cash-For-Clunkers are all to blame for why we didn’t see prices for cars go down.
During the pandemic, the lack of available cars and a shift towards more expensive models (which I call trimflation) meant the sharpest increase in new car price increases going back at least to the 1950s. If you’re curious why cars got relatively cheaper starting in the 1990s, free trade (the thing the Trump admin is trying to get rid of) is one part of the equation.
Ok, I’ve written long enough that the markets have now opened in the United States and it’s officially a “bear market,” if only briefly (it seems like stocks are coming back a bit). The goal here by the Trump Administration is to build prosperity by erasing trade deficits. That is a thing that could happen. Or, as Robinhood’s trade director Stephanie Guild just said on Bloomberg, the tariffs are a “tax on every American.”
The 25% Tariff On Imported Vehicles Will Apply To 80% Of Vehicles Priced Under $30,000
Charts are fun, this feels like a good morning for charts.
This one is from Cox Automotive, which has a big analysis of the tariff policy out, and the reality is that these tariffs will impact cheaper cars in a big way:
According to our analysis, the average price of a new vehicle in the U.S. is north of $48,000. Importantly, however, more than 40% of new-vehicle sales by volume in 2024 were priced under $40,000. These “lower-priced” vehicles are particularly vulnerable to the new tariffs.
Our analysis suggests the 25% tariff on imported vehicles will apply to nearly 80% of vehicles priced under $30,000. Vehicles in this category include popular models such as the Honda Civic, Toyota Corolla, Chevy Trax and Trailblazer, Nissan Sentra and Honda HR-V.
What does all this mean for average vehicle prices?
In the coming months and years, as new tariffs settle into place, vehicle prices in the U.S. are expected to increase. A bill for the 25% duty at the border for imported vehicles and a 25% tariff on foreign content in vehicles assembled inside the U.S. will likely result in price inflation within the auto industry. Our expectation is that vehicles impacted by these tariffs could see prices increase 10-15%. In addition, given market dynamics, we also anticipate seeing at least a 5% increase in prices of vehicles not subjected to the full 25% tariff.
So, not down.
Some Jobs Will Come Back To The United States
Nissan has had a rough go of it and was considering cutting back jobs at the Tennessee plant that builds the Rogue. Now? According to Nikkei Asia, it’s possible that production does shift back to its plant.
Struggling with poor performance, Nissan had planned to halve shifts on some of U.S. production lines from April, reducing the number of Rogues and other models being made. Because of the tariffs, the company has decided to scrap those plans and instead increase production.
The Trump policy imposes a 25% tariff on cars imported from Japan and other countries, which raises the cost of exporting vehicles produced in Fukuoka.
Other Japanese automakers may follow suit. Automobiles are a key industry in Japan, with product shipments equivalent to about 10% of gross domestic product. The transfer of production overseas would lead to a drop in GDP, and measures to combat the hollowing out of the country’s industrial base will become a major challenge.
Does this mean that we could see the long-term shift in production to our shores? Maybe. Investment takes forever and requires confidence in the system. Are people confident in the system? Not so much. Welcome to the resistance… Bill Ackman?
It’s not impossible, though, as automakers can eventually do something. From that same Cox Automotive analysis linked above:
The auto industry is a high-cost, complex, long-horizon business that operates best in a stable, consistent environment. However, it is also a highly innovative, tech-intensive industry and one that has recently come under increased pressure by the success of Chinese manufacturers that have raced ahead in terms of speedy and efficient development cycles, as well as cost efficiency.
This situation comes at a time when traditional automakers are deeply engaged in rethinking decades of ingrained production methodologies. So, while the business of building, selling and servicing vehicles is highly dynamic, given sufficient time, investment, and the proper incentives, automakers and dealers should be able to navigate this challenge. The toughest part will be doing so without pricing more consumers out of the new-vehicle market, shrinking the market further.
How do we make cars cheaper?
This Probably Only Works With Increased Automation
Lutnick: “The army of millions and millions of human beings screwing in little screws to make iPhones — that kind of thing is going to come to America.”
— Aaron Rupar (@atrupar.com) April 6, 2025 at 10:52 AM
If there’s one face to put on all of this, it’s Commerce Secretary Howard Lutnick. While a lot of this is built on the President’s preferences, a lot of those preferences were informed by Secretary Lutnick. Conveniently, he was out on “Face The Nation” this Sunday explaining why we’re putting tariffs on penguins to bring jobs back here.
It’s anyone’s guess how any of this actually goes down, but if all the jobs come back here, it’s hard to imagine how the prices do anything but go upwards without some kind of labor shift. That labor shift? Probably robots.
You can read the whole transcript here, and I’m going to focus on one piece, about how this is going to relate to employment:
MARGARET BRENNAN: And you said that robots are going to fill those jobs. So those aren’t union worker jobs.
SEC. LUTNICK: No, it’s really automated jobs. It’s automated factories- automated factories. But the key is, who’s going to build the factories? Who’s going to operate the factories? Who’s going to make them work? Great American workers. You know, we are going to replace–
MARGARET BRENNAN: You said robots on other networks. You said that to FOX.
SEC. LUTNICK: –the armies of millions of people- well, remember, the army of millions and millions of human beings screwing in little- little screws to make iPhones, that kind of thing is going to come to America. It’s going to be automated and great Americans- the tradecraft of America, is going to fix them, is going to work on them. They’re going to be mechanics. There’s going to be HVAC specialists. There’s going to be electricians, the tradecraft of America. Our high school educated Americans- the core to our workforce, is going to have the greatest resurgence of jobs in the history of America to work on these high-tech factories, which are all coming to America. That’s what’s going to build our next generation of America.
This sounds a little bit like the old joke about how the bad news is robots are taking your jobs, but the good news is someone has to fix the robots, but the worst news is that someone just designed a robot that fixes robots.
My question is: Are there enough people to do these robot-repair jobs? There’s already an automotive technician shortage in the United States. What exactly is going to change that? The answer, I guess, is more robots.
What I’m Listening To While Writing TMD
For no reason, “Yoshimi Battles The Bing Robots Pt. 1” by The Flaming Lips is on my mind this morning.
The Big Question
If I handed you $50,000 today and you had to spend it on cars, what would you buy? How many cars?
It’s just backwards.
They’re trying to preserve the lower paying factory jobs, and are going to encourage other economies to take on the new wave of higher paying jobs in the new industries that this planet needs, and has people willing to pay for.
It’ll be hilarious when American workers are working to assemble iPhones as contract workers to higher paid workers designing them in Asia. Or replace “iPhones” with other more important ideas in pharma, geological, health, education, environment, and bio.
Ah, the good old days of the housing bubble.
I worked for a company that made banking software. The banks were asking for an update to allow them to write “neg am” (negative amortization) loans, where the monthly payment wouldn’t cover the interest and principal. That meant the outstanding loan balance went up every month. The theory was the rapidly increasing property value would outpace the escalating loan balance, so even if the loan went bad the money gained on the sale of the foreclosure would make up for any losses.
If course, that’s not how things worked out (not by a long shot) and fortunately we didn’t get the update completed before the whole thing collapsed in 2008.
We’d tried to tell them it was a bad idea, but they wanted it anyway. Our slowness probably saved our clients from even more disastrous losses than they actually suffered, and it still amazes me the clients even asked for that feature.
One of the things I hate about this trade war is that it’s made Jaguar’s decision to just not bother making cars for a while seem like a good idea.
My father used to call things like that “precision planning”.
$50k? I’d buy a pair of identical used 2013+ Leafs with heavily degraded batteries, swap the batteries with the biggest packs I could find (probably 62kWh). The old batteries would be repurposed as a battery wall. That would probably costs about half the $50k. Then I’d get a V2H setup and use those Leafs to power the home using the bosses electricity. Suck it PG&E!
Leftover money would be invested and used for car related expenses. Insurance, parts, etc.
Or maybe a used Tesla. All that hate is an anchor on prices making them look much more interesting to me.
This is the way. Need enough old batteries to properly charge your ev’s from zero overnight (or as fast as possible).
I would change your formula and replace the Leaf’s with Bolts. I’d get a 30kW solar array.
My actual spend on the car would be just enough to pass the “I don’t have to give this ficticious money back to Matt” test and just spend it all on as much solar as I can get.
Do Bolts have V2X capability? If so I’d like to change my answer.
Nah, I wish they did, though. If you have all that solar and batteries, then you wouldn’t need it anyway.
Actually, I take that back, the inverter is capable of supplying 1500W to the DC battery. What a lot of folks do (and I will before I go camping this summer) is add a nice inverter and connect it directly up to the battery. That’s 65kW/1.5kW = ~43 hours @ 1500 W. Enough to keep the fridge on and furnace chugging.
Nah, I wish they did, though. If you have all that solar and batteries, then you wouldn’t need it anyway.
Well the point is to use those Leafs to power the home using the bosses electricity. Solar would be great but that’s not on the table.
That’s 65kW/1.5kW = ~43 hours @ 1500 W. Enough to keep the fridge on and furnace chugging.
1500W is not enough to keep the fridge on and furnace chugging at the same time. You’ll need to juggle a lot. That’s what (on paper) using V2X avoids.
You know why cell phones are assembled by hand?
With the pace of innovation: they change so often, that it’s cheaper/easier/faster to have a human do it. And it’s cheaper to design devices to not integrate automation.
oh get out of here with your knowing stuff
Ah, right.
Logic, in my politics?
Fuhgeddaboudit!
Hmmm….$50k only on cars, huh?
Thinking one of the cheaper Japanese sports cars that are going to disappear in the next little while, to be honest. Even if the bluster comes to nothing, the writing is on the wall for the market regardless, just like the end of the muscle car era.
So, I guess a Toyota GR86 or Mazda Miata. Both are about $30-$35k.
Thinking the last $15-20k could get a newer used Mazda3 or Honda Civic.
“If I handed you $50,000 today and you had to spend it on cars, what would you buy? How many cars?”
I’m assuming that’s US$50,000… which is CAD$71,000.
So I’d probably buy a new Hyundai Ioniq 5… long range RWD one in blue. And that would be about CAD$66,000 after tax. Then with the remaining $5000, I’d get a weekend or fun car like this 1975 MG Midget:
https://www.autotrader.ca/a/mg/midget/burlington/ontario/19_12913931_/?modalXS=1
Or this 2002 Saab 9-3 Viggen:
https://www.autotrader.ca/a/saab/9-3/burlington/ontario/19_12966772_/
50k on one car?
Find a nice x3m40i and enjoy the b58 as the world burns.
Or an M2.
Otherwise could pick up a nice older tacoma and fulfill my urge to have a 944 again pretty easily.
As someone that works in American manufacturing for the last 15 years the answer is always automation. If you didn’t have the money for robots, you hired immigrants, but obviously they are going to become scarcer.
I recently watched a video tour of a Rockwool plant in West Virgina, and they had 15 freaking employees. Manager, supervisor, QA, and then mostly forklift and front loader drivers. And spoiler, I bet those forklift jobs are really easy to automate.
Yeah…those forklift jobs are REALLY easy to automate.
I’m a big fan of Rockwool.
One of our plants in the EU has automated forklifts and machinery, it’s pretty impressive. The irony is that in this organization, it’s the US workers that are the low paid ones doing the scut work.
Working in traditional manufacturing, the goal is always how you can replace people with machinery.
Machinery costs less, and makes fewer errors.
It also lasts longer than most employees, meaning that your (mostly) fixed cost to purchase it allows you to have far more stable predicable operational costs.
Also, by the way, the automation isn’t solely driven by cost – in the vast majority of the country you just cannot hire anyone to do (semi) skilled labor. I have seen many factories in recent years that did not invest in new capacity because they couldn’t increase their workforce – and these were at factories with good middle-class wages, some of them union.
50k? Maybe a new WRX that has not been vaped in? Fix the few issues the others have.
As for the imports. Even if the cars are made here, the parts come from other countries. Do the countries pay the tariffs? Of course not we the consumer pay that. Net result, no change in the current trend.
Find a used WRX hatchback that hasn’t been vaped-in or “tuned”, use the leftover money to keep it running.
A unicorn?
$50k? Ecoboost automatic Mustang convertible. Sun’s out and I need a hand to hold my ice cream. Then a Subaru BRZ. Weekend toy that can be fun at legal speeds.
I remember a time not too long ago when $45k bought you a loaded Mustang Convertible … with the 5.0. And all the car magazines were saying that this is waaaay too much to be paying for a Mustang.
50k on cars well I just found out this weekend one of my FJs front coils broke so I would use some of that for new suspension for that. My Firebird could use a nice new paint job and hood either aligned or a new hood plus a fender is dented and needs to be replaced. I also would get a nice trailer to pull my firebird and FJ it to track/trails. The rest of the money would go towards replacing my fiances TourX in the near future as it is nearing 90k miles and not sure how many miles that thing will last.
$8K – Mitsubishi Minicab K-Truck (commute/work/snow)
$16K – 2012 Jaguar XJL 5.0 (Everyone needs a big sweet luxury sedan)
$10K – clean Mazda Miata NC (commute/fun)
$16K – Mechanically solid Chevy Express Van (work/towing/cargo/emergency apt.)
There my $50k worth of driveway filler!
50K I’ll leave the country and buy a lada and learn some eastern European languages.
$50k just gets you a used is500. I think ill take that to compliment my 9-3, a *reliable* high displacement NA sedan vs a finicky 2.0T saloon for sedan dominance
I love how Trump’s boy keeps blowing sunshine up the asses of “the poorly educated”. He promises them jobs running and maintaining automation equipment, but most of those jobs will pay no more than the jobs available to them now. The real good-paying jobs will go to people with degrees who have the technical skills.
I just can’t fathom why anyone would believe anything the president (or his minions) say. The historical record tells me not to.
The media ecosystem in the US is full of people who want or want to preserve their “access”. So they don’t dare report anything that might upset the people in charge. That goes double for the owners.
Last week my mom said she thought Trump “made IVF free” because “he’s very pro family.” People will genuinely believe anything …
Now just imagine that lie permeating through every conservative Christian church in America, every Sunday…
This is why we left our long time church and moved to a different denomination. It had radically changed since Trump/Covid.
The real problem will be that our country needs to have available jobs for ‘lower skilled’ people to survive on, otherwise they will increasing turn to crime and eventually revolt against the elite.
Not everyone can be an all-star engineer/technician no matter what they told you back in grade school.
You’re right, but we’ll never have that so long as wages are based on the economics of the free market. We’d have to make the minimum wage equal to a living wage.
As far as manufacturing goes, the free market has not been kind to the region I live in. Majority of the manufacturing has left over the last 30 yrs or so, most moved to other ‘cheaper’ countries.
Most of the manufacturing still around is tied to the auto industry.
We have gotten addicted to ‘cheap’ stuff, but at our own peril. Remember back in the 70s/80s a TV would be $400-$500. What would that be adjusted for inflation now? Now you can get a huge one for $300 or less.
Yeah I remember when my folks bought our only “brand new” TV, a Zenith in like 1979, and it was almost $500. Mom had a cow.
Of course, just a few years later I used paper route money (young-uns, look it up) to buy a brand-new 13″ B&W for $49. But that was a crap TV compared to the Zenith with “ZOOM“.
There’s always the Reeks and Wrecks.
I wish. So far all they’ve done is vote elite criminals into office.
“A riot is a dangerous thing. And I think it’s about time we had one.”
Young Frankenstein.
He’s building a wall, right?
I think I heard him say something about that?
$50k for cars? 10 goes to buy the cleanest early-mid-2000s mini truck I can get (before the cabs got so big and the beds so small I might as well just drive the 3/4 ton to do all the truck stuff), 25 pays off the wife’s Stinger so all cars are free and clear, 15 stays in reserve for when the BMW starts showing its age in a few years…
But who is going to fix the robots that fix robots, uh, who is gonna?
Checkmate libs!
50 grand in dollars is worth 39 thousand pounds currently.
That would get me a new GR86, if there were any available. Nothing else I want new.
Secondhand it’d buy me a nice S2 Exige with a supercharger, or a tatty S3 Exige V6.
If motorcycles were allowed I might spend it on a Ducati 848, a Honda VTR SP2 and a Cayman for when it’s raining.
I used to want to move to the US, and I’m qualified and experienced in fixing automated machinery, but in the current climate I’m not sure I’d be welcome.
Also anyone who thinks you need a significant number of maintenance engineers to staff your factory has very much missed the point of automation. We used to have three engineers on shift: two working full time on the old manual lines and one guy sat in the smoking section of the canteen waiting in case something went wrong with the new machines that made four times as much stuff in the same time.
Got it.
New strategy for jobs creation: operate less reliable equipment with a closed economy, so as to keep out that pesky competition offering efficiencies.
If motorcycles permitted: a Ducati MH900e would absolutely tick the box for me but I might be terrified to take that out on actual roads and damage it; so I’d likely be happier with the Honda RC51 as you suggest, in real traffic.
Hmm never said it had to be a new cars, I would buy a manual BMW E39 wagon and use the rest to fix the rust and sensors.
$50K? I’d probably spend $40K on an NA Miata for my daughter, a newer work truck with a lift-gate for my rental-business, a really nice 2014 Cadillac CTS I’ve had my eye on, and a late 2000’s Cadillac SRX for the wife. That last 10K would be to install a really nice lift out in the garage to help maintain the fleet.
Lift ideas is genius. Don’t forget a heater if you’re up north and don’t have one already.
I actually already have a house-sized gas furnace to heat the garage, plus it’s insulated. The lift would transform things from “heated-3-car” to “Garaj Mahal”!
Jealous!
Good for you, though. Someday I how to get to that level.
$40k on an NA Miata?? Holy crap, how high have the prices gotten?
That’s what I thought when I heard $10K for a lift!
I paid $3500-ish for a high quality (I thought) 4 post in 2020 and installed it in a day with some friends.
A four-post is likely the route I’ll actually go at some point. A while back I looked into getting an in-ground lift installed that was large enough to handle the ’59 Cadillac project I had at the time, and all-in was pretty close to $10K.
I’ve been shopping four post lifts recently and it looks like a barebones one starts around 5-6k. Add a few extras like bridge jacks and I bet you could hit 10k easy.
And it’s only going to get worse, because regardless of where they’re made there’s a lot of steel in those things.
That’s why my lift is constructed of 1/32 carbon fiber.
I certainly could have worded that better. That said, NA prices do seem to keep climbing. I’d predict the value on a nice NA to outperform the stock market for awhile.
Of course, I’d also predict the value of a cheese sandwich to outperform the market in the near term.
for $50K? CTR or ITS or Corolla GR. Probably used, then spend the rest on “detuning” the giant screen and the nanny features out of it.
I’d still keep my miniwagon for long or large purchases.
There will be no factories built in the US as a result of tariffs. Companies are smart and they know these tariffs won’t last. All they have to do is wait until midterms and poof, they’ll be gone. At best, manufacturers will shift production to existing US factories where they have a choice of where to build. Let’s follow what Ford does with the Maverick. It’s built in Mexico but they could certainly tool up a factory in the US to build it. But I’m guessing they won’t. Taking bets???
And “robots”? Come on, that’s just stupid. Robotic assembly exists now.
Something else: few US companies make commodities anymore unless it’s uneconomical to make them elsewhere. They expect higher profit margins. Ford is another good example since they’ve got a special edition for everything and it costs more. They want 40% margin on everything. If they can’t generate that, build it in Mexico and claim that US labor just costs too much blah blah blah. I just bought a Forester, indeed built in Japan – not a low cost country. They could build it in the US in existing factories but I bet they just wait out the temporary tariffs.
Exactly! They’re not going to make billion dollar long term investments on the President’s every changing priorities. All they’ll do is shuffle some stuff around to minimize tariffs and then just pass the rest on down to us, hoping the next Administration back off tariffs (after much $$$ spent lobbying).
Again, Matt, thanks for reminding me I need to contact Colonial Penn for my robot insurance.
A loaded 2025 Civic hybrid and a base 2020-ish Ford Transit Connect would take care of 99% of our household vehicle needs for the next decade. Naturally someone in the household will veto that combo and we’ll get an SUV of some sort . . . with cladding, lots and lots of cladding whether we want it or not.
Wait, you’re implying that there are people out there that don’t want the cladding???
I swear, the same snake oil salesmen that were selling the industry on vinyl tops decades ago are back with a twist.