By the time this post goes up, the markets will have been open for a while, and you’ll probably have your fair share of people telling you that the chaotic tariffs announced yesterday are, shocker, causing chaos (If I’m wrong and the markets open higher, I’ll just delete this paragraph and no one will ever know). The opening shots of any war, even a trade war, are hard to contextualize in real time, which is why they call it the “fog of war.”
I’d like to do better than that. While confusion may reign when the first shots are being fired, the same advice applies at the beginning of a war as it does to the end of one: duck!
The Morning Dump today will be mostly about tariffs and their impacts, and my best chance to help you today is to give you something practical that you can do. Earlier this week, it was the idea that you should go buy a car ASAP if you want one. That advice still stands, especially as we enter an early period of price disruption when certain car prices might drop.
More importantly, though, is what to do about the car you already own. If you’ve got a car that’s not under some sort of warranty, you should get the parts you need for it now. Today. It’s time to hedge, and hedge hard.
What Was Actually Announced Yesterday
The video above is the full announcement of tariffs as part of “Liberation Day” and “Make America Wealthy Again.” Here’s a shorter version of why we’re doing this from The White House:
I, DONALD J. TRUMP, President of the United States of America, find that underlying conditions, including a lack of reciprocity in our bilateral trade relationships, disparate tariff rates and non-tariff barriers, and U.S. trading partners’ economic policies that suppress domestic wages and consumption, as indicated by large and persistent annual U.S. goods trade deficits, constitute an unusual and extraordinary threat to the national security and economy of the United States. That threat has its source in whole or substantial part outside the United States in the domestic economic policies of key trading partners and structural imbalances in the global trading system. I hereby declare a national emergency with respect to this threat.
The whole proclamation is interesting because there’s a lot in there that you’d expect from a Democratic president with regard to the importance of domestic manufacturing. President Biden made a lot of similar arguments, and his response to the lack of American manufacturing was to offer the carrot of extra investment and extra tax breaks for companies that would expand in North America.
That takes patience and time, because whole industries cannot shift overnight, and the disruption of trying to do it suddenly has been deemed unpalpable to pretty much every president since Herbert Hoover. This current President sees an emergency and, like FDR, he doesn’t want to waste the moment.
At this event, President Trump held up a chart showing what kind of burdens various countries put on trade and explained how we’d respond in kind with “reciprocal tariffs.” This chart is interesting:
There’s a 72% tariff charge from Thailand, which somehow hasn’t come up yet on season three of The White Lotus. Then there’s a 97% tariff from Cambodia. Wow! Crazy. I’m starting to suspect maybe this chart is a little suspicious.
Oh, wait, there’s a formula:
To conceptualize reciprocal tariffs, the tariff rates that would drive bilateral trade deficits to zero were computed. While models of international trade generally assume that trade will balance itself over time, the United States has run persistent current account deficits for five decades, indicating that the core premise of most trade models is incorrect.
Ah, got it. So they basically took the trade differential between the two countries and then assumed that it was due to a trade imbalance caused by some sort of local tariffs/currency fluctuation/whatever. That’s bananas. Literally, because now the cost of getting bananas from Indonesia is gonna be 32% higher than it was, so you better learn how to grow some. Oh, and Cambodia, one of their three biggest imports to the United States last year was: “Articles of leather, animal gut, harness, travel goods.”
I’ve talked about the Theory of Comparative Advantage before, so go read that, but conceptually this is like me buying a car from Honda and then being mad that Honda did not give me the equivalent of $35,000 worth of something in trade. I have a huge trade imbalance with Honda right now, guys.
The full list is hilarious because it includes unoccupied islands in Antarctica. The penguins are pretty reasonable as, by these calculations, they’re only charging us a 10% tariff.
Is there an emergency? Is this creating an emergency? Let me start with the Bloomberg headline of the moment, which is “Trump Tariffs Set to Wipe Out Nearly $2 Trillion From US Stocks.” That doesn’t sound great.
Roughly $1.7 trillion is set to be erased from the S&P 500 Index when trading opens Thursday amid worries that President Donald Trump’s sweeping new round of tariffs could plunge the economy into a recession.
The damage was heaviest in companies whose supply chains are most dependent on overseas manufacturing. Apple Inc., which makes the majority of its US-sold devices in China, is on track to open down 7.7%. Lululemon Athletica Inc. and Nike Inc., among companies with manufacturing ties to Vietnam, are down at least 9%. Walmart Inc. and Dollar Tree Inc., retailers whose stores are filled with products sourced outside of the US, are trading at least 4% lower.
Few stocks in the US were unscathed with the biggest ETF tracking the S&P 500 on pace for its biggest decline since 2022. More than 90% of companies in the S&P 500 were trading lower at 8 a.m. in New York, with over half of its 500 stocks down at least 2% in premarket trading.
Trump take egg, now Trump take 401k, I guess.
Car Prices Might Not Immediately Go Up
If there’s some good news in this, it’s that the same people who are trying to put reciprocal tariffs on Southern Elephant Seals are giving automakers a time to adjust and, for the moment, are exempting USMCA-compliant goods. Automakers will still have to come up with a way to determine what kind of non-USMCA-compliant parts are in their cars, but it seems like the Maverick is saved.
Even with the massive uncertainty built into these tariffs, it’s not like car prices have to immediately go up by equivalent amounts, as Automotive News is pointing out this morning:
While President Donald Trump has imposed a 25 percent tariff on imported vehicles, in all likelihood, consumers will not see a 25 percent price hike. That’s because of complex factors including the amount of non-U.S. content in each vehicle, automaker calculus, dealer decision-making and loan agreements.
Cox Automotive, for example, predicts a 2.8 percent year-over-year increase in wholesale vehicle prices in 2025. Black Book projects a 5 percent increase in the average transaction price this year. Morgan Stanley predicts the tariffs will boost the average price of a vehicle by 11 or 12 percent.
The projections recognize that the tariff is not applied to the manufacturer’s suggested retail price and that the industry relies on sometimes labyrinthine systems to calculate the vehicle’s cost. The price of the vehicle is determined using a cocktail of market research, bills of materials, financial agreements, intuition and other elements. Even more variability enters the picture in the dealership lot, where prices vary widely by region, timing, personal relationships and the way buyers settle up with the retailer, a separate business from the automaker.
Because it’s an average, certain cars are going to suffer a lot while others might skate by with minimal disruptions. Carmakers can then decide if they want to cancel certain cars (almost certainly affordable ones, since those have the lowest margins), let higher-end models get more expensive, or average the costs across all their vehicles.
German automakers seem to be weighing all these options, according to Bloomberg:
Europe’s automakers are raising prices and preparing to shift car production to the US to try to protect themselves from President Donald Trump’s tariffs.
Volkswagen AG plans to add import fees to the sticker prices of its vehicles shipped into the US, indicating Trump’s 25% auto duties will have an immediate effect on Europe’s biggest carmaker. Volvo Car AB and Mercedes-Benz Group AG are looking at expanding local output to sidestep the levies.
All the automakers above have plants in the United States, so they can increase production here, which is part of the reason these tariffs exist. But they can’t build everything here, and it sounds like Volkswagen plans to use its window sticker as a form of protest to show how expensive everything is. I wouldn’t be surprised if we saw more of that.
I’m going to save talk of retaliation from other countries until we see who blinks first. Also, blowing up the entire global trading order is a lot to talk about in one TMD, so we’ve got time.
Conversely, automakers who are better positioned with regard to tariffs can take advantage of the situation, as Ford is doing by extending employee pricing to everyone and advertising big discounts.
The automaker is launching “From America, For America” on Thursday, the day President Donald Trump’s tariffs will be enacted on the auto industry. The campaign will run in traditional print media advertisements, television spots and social media, said Rob Kaffl, Ford’s director of U.S. sales.
As part of the campaign, Ford will offer its employee-pricing plan, known as the A Plan, to consumers on most of Ford 2024 and 2025 model year vehicles through June 2. Ford is also extending to June 30 the program that offers a free home charger and complimentary installation to those people who purchase or lease an all-electric vehicle.
Again, go buy a car while the buying is good. None of the cars that have already been imported to the country are subject to these tariffs. They’re not retroactive.
Prices On A Bunch Of Stuff Will Go Up, Mostly Because Companies Can Raise Prices
The big concern I have in all of this, besides the Schrödingeresque nature of these tariffs, is that automakers and other companies are always looking for a reason to raise prices. Always. I refer you to my Trimflation article, which gets into the work of Economist Isabella Weber, and the idea that once companies realize they can raise prices if they all raise prices together, they’ll now probably do it.
Tracy Alloway was thinking about the same thing, and pointed out as much in her Odd Lots newsletter yesterday:
[T]ariffs provide yet another convenient reason for companies to raise their prices. Many customers are aware that tariffs are coming, and some of them also believe that tariffs will be good for the country; they’re willing to accept the definite short-term pain in exchange for the possibility of long-term gain. (Of course, I should note here, that many of the people who support the tariffs also tend to be those who have the least purchasing power).
So no matter what happens today, there’s an argument that the inflationary impulse is here to stay. Uncertainty over policy breeds capacity issues, and tariffs breed change, and all of that is a potent peg for companies to push price and preserve (or even improve) margins.
Carmakers may not attempt as they’ve got a lot of capacity they have to use and, if they assume this isn’t a long-term policy, might use the opportunity to pick up market share. Parts companies, though? Parts companies may not have the same philosophy.
This Is Why You Should Get Your Car Fixed Right Now And Stock Up On Parts
I’m not going to say the sky is falling. Maybe it’s not. Maybe the stove isn’t hot. I refuse to look at my investment accounts right now, because I’m young enough that I view this as potentially a great buying opportunity.
However, concerned that this was coming, I did a lot of work on my old BMW and bought a new car while the deals were good. Why?
It’s rare in life that you find yourself in a position where you absolutely have to buy a new car. If you’re reading this website, you probably already own a car, and you can keep that vehicle running indefinitely. If new car prices go up, your old car is going to become more valuable, as happened during the pandemic.
Unfortunately, the price of keeping that car on the road is almost certainly going to go up. If you need a car and your car breaks down, you have to fix your car. You don’t really have much of a choice. Do you know where the parts for your car come from? Those engine mounts for my BMW come from Germany. Because they’re already in a warehouse in Connecticut, they aren’t going to be more expensive, but when those run out and they have to be reordered…
To make matters worse, the disruption of global trade risks potentially blowing up the value of the dollar. If that happens, not only will imported parts be more expensive because of tariffs, anyone buying in $$$ will probably have to pay more.
There’s a scenario where maybe this doesn’t happen. Where mechanics around the world decide to eat the cost of those parts to make you happy, or where all of the parts for your car are made in the United States. Crosley owners, rejoice!
What I’m Listening To While Writing TMD
The premise of Pulp’s “Mis-Shapes” is: What if all the loner weirdos got together and got revenge on all the cool people? Unfortunately, loners don’t group together that easily. It’s a beautiful dream, though.
The Big Question
What do you need to do to your car and where do the parts come from?
Top Photo: Depositphotos.com
If I take a look at people like Bezos, Musk, Thiel, and other tech billionaires, Pulp’s song up there feels a lot more prescient.
Another dose of reality… Stellantis announced they are temporarily suspending production in plants in Windsor and Toluca. Which is causing 900 layoffs in Indiana and Michigan. Winning!
Not to worry! The people that got laid off at that factory will be able to work in another factory that will almost certainly probably be coming within the next month or 15 years or possibly never, though there’s a 50% chance of that happening, I think.
Bolt: nothing, just swapped from winter to normal wheels/tires, the parts came from the garage storage loft
XJ Cherokee: still trying to figure out the best way to get the mouse piss or whatever it is out of the heater core that stunk up the car when I drove it in February; parts- vinegar from the grocery store?
Have you disassembled it and replaced the core? If not, it is prolly in the heater core fins and will annoy you until you do this.
I would use comet and a scrubby, then soak the unit in vinegar.
I partially removed the dash to the point I can see into the heater core, but don’t want to disassemble further and risk not being able to get it all back together, and don’t have the ability to deal with fluids connected to the heater core. I’m sure someone who was more adept at things would have had it removed and cleaned by now. At least I rarely ever drive it in the winter, so easiest solution might be to just not run the heat…
Fan on high and lysol spray into the cabin air intake.
Thanks, I’m thinking about doing that with vinegar with everything up to temp, but the air intake is pretty well hidden back in the cowl under a built in metal panel, so it’ll be tricky to actually get it where it needs to go.
There is AC coil cleaner made for that purpose. Spray it onto every corner of the evaporator. Wait 10 minutes. Rinse with clean water. That stuff should take care of anything on the fins.
Thanks for the advice, that could be plan C
I have been looking at trading my 4runner in for a WRX, but that’s not going to happen…
1981 AMC Jeep CJ-5: Needs fuel pump relocated to tank due to fuel injection conversion that now vapor locks, larger fuel lines, charcoal canister installed, e-brake fixed, oil change, and horn relay. I literally ordered all the parts a week for Easter Jeep Safari…
2021 Toyota 4Runner: Needs tires in 18 months-ish, fluid changes. Need to hunt down squeal in engine prolly bad tensioner. Currently, getting body work done due to someone backing into it.
2021 Honda CR-V: Needs fluid changes
Oils shouldn’t be impacted, pretty much 100% of all autoparts are now coming from over seas. I’m glad I pulled the trigger when I did for the car that needs the most. I’m sure tires will get even more stupid expensive.
I just want to say thank you to Matt. It’s a hard time to be writing about the news, and you strike a balance of properly bummed while keeping the door ajar for hope. I’m sure it can’t be easy to have to stay abreast with this crap for your job, and I assume there’s an emotional cost you pay for that (maybe I’m just projecting). Just know that it’s worth it, because your column helps me stay grounded in these dark times.
^ My thoughts exactly!
2012 Corvette: my ‘daily’, I drive like 4k miles/year, needs an oil change. No worries here
2021 Pilot: oil change and some front end work. Getting this done next week. Trying to talk my wife into getting something better since neither of us like this CUV.
2016 Accord: rear brakes and fluid changes. Scheduled for next month.
2013 Escape: what doesn’t it need. Better to set this POS on fire, but my kid likes it for some reason. Seriously the most uncomfortable car I have ever driven.
I may put the search for a CJ/YJ/TJ on hold pending the fallout from the orange idiot.
I will go scan the codes on the GTI as I don’t know why the CEL came on, but the parts come from FCPEuro. Sigh.
The Tundra should be fine to drive if things get messy. The timing belt isn’t due in this administration.
My friend pulled the trigger on a new car in November in anticipation for economic turmoil. Smart. I’ve been stalking a new car for nearly two years as my ’09 Outback spits and coughs. So far the fixes have been minor and relatively inexpensive but the timing might not be great to buy a new/newish car when it finally goes. That said, I’m not going to make a rash purchase of a big ticket item just to outsmart the orange madman lobbing grenades at the world economy.
For Matt and all the wise readers here: With all the tariffs on new vehicles and parts, what do you think will happen to the prices of used pickup trucks, 2-4 years of age, 30-50k miles, 1500/2500 series?
One of my sons needs to replace his pickup truck in the next month or two due to high mileage, corrosion, and frequency of costly repairs. He is in that small minority that actually needs a truck for his daily job. He would have to finance a new pickup since they’re so expensive, so he’s interested in the used market.
He should buy sooner. Used market will increase due to demand. If he can travel a bit, going to CO, NM, AZ, UT, NV, CA, or WY might be worthwhile to find one that is a bit older, but doesn’t have rust.
Although the dashes tend to crack and the seat foam / interior breaks down.
Great idea, thanks! I’m not thinking that clearly yet after surgery yesterday. One of our other sons lives in Montana. The older vehicles out there are definitely corrosion-free.
If he likes his truck, he could replace it with the rust free version of it and put the soft goods in it.
I hope healing from surgery goes well! Healing from surgery is a blessing and a curse.
Thank you!
I’m not one of the wise readers, but if I were in need of any vehicle, I would buy as soon as possible. Demand for used cars is probably going to start increasing, which means rising prices, too.
Thanks you.
Lets me see on parts
89 Firebird: currently working on the exhaust I should hopefully have everything I need. I also need to find a way to reinforce the clutch pedal some lots of play in the firewall when pressing the pedal down.
92 D250: I think I have everything to do the front end suspension rebuild so just need to find time for it.
2013 FJ: I have a new driveshaft to install and I am sure it needs other work like a trans flush. It has over 160k miles at this point and is rusting away so I have given on my plans of new bumpers and a winch.
2018 TourX (fiances): hopefully it doesn’t need anything I just did the blower motor and resistor and had trans fluid changed recently. Some parts for that thing are near impossible to find.
2023 RF Miata: shouldn’t need anything besides normal maintenance. Going to change the oil and trans fluid this weekend as the car just hit over 5k miles and I would like to get some of those fluids changed.
According to professional fuckwit Howard Lutnick, “The coolest jobs, the highest-paying jobs, they’re all coming to America”. Oh boy!
Thomas Friedman’s latest op-ed opening:
Back in the mid-teens, China approached my company and said they had to move their factory in China to a new location because they were building a “sensor manufacturing campus” to make things like; pressure sensors, humidity sensors, load cells, etc….
No choice. You move or get out of China. This was 10 years ago.
Anything we start today is still 5-10 years out.
Is that the same weirdo who just said that Europe doesn’t buy our beef because their beef is “weak” and they’re jealous of our “beautiful beef”? That may have been the Trump 2-era quote that made me finally lose it.
That would be the weirdo in question.
98 cherokee, 95 silverado, and a 2012 sequoia. I learned a long time ago that if you ever want to have money in your pocket, don’t buy german. Simple as that. I now get my parts from rockauto instead of fcpeuro and I’ll never go back.
This why I’ve been stocking up on front suspension parts for my car. Just have the shocks and struts to buy, and I should be good for the next year or so before I have to buy any more parts.
I can hear clink-clink when I get on and off the gas, I’m thinking it’s probably U-joints. No big deal, usually, but apparently Subaru considers the U-joints to be non-serviceable and you have to replace the entire drive shaft :-/
Find a driveline shop near you.
They can replace the yokes/Ujoints with serviceable ones cheaper than a new driveshaft.Drop it off today pick it up in a couple days is what we did in the shop I owned.
That’s not a bad idea, better than me trying to chisel them out from under the car.
And if I remember correctly it has a center driveshaft bearing also ?
it seems like it was about 200$ for everything a few years ago?
Of course in todays dollars that means 300$
The year of the absurd.
People have rightfully had court ordered conservatorship for less financial malfeasance. This is on par with the HHS issuing an urgent warning that distilled water is fatal, citing that a lab rat exploded after being injected with a liter.
Simpleton.
Chevy Express cargo van – hopefully nothing major, just fresh fluids, accessory belt, pulley, belt tensioner, maybe a water pump, and fresh spark plugs to do a tune-up.
Luckily I think most of these are heavily stocked in US warehouses and some of it might even be domestically-made.
Armada – pads, rotors, all 4 tires, acc. belt, spark plugs roughly 4-5k from now.
If I buy all original parts from Nissan it might hurt, it’s a J VIN vehicle with a lot of Japanese parts and not much is shared with other Nissans that are manufactured in the US.
Bikes – All of them are Japanese. Shopping around on Webike Japan will get tariffed now, no new tubeless rims for the XT250 I guess.
Is your Armada the “Patrol” of Armadas?
I always kind of DID want a Patrol….
Yes, Y62 Armada.
It looks like a Y62 Patrol but it is significantly de-contented mechanically.
Compared to the Patrol, the Armada sits 1 inch lower, control arms are different front and rear, springs and spring rates are different, diffs are smaller, (front R180 diff is shared with the Frontier, rear is R230 instead of R248), thinner CV axles, no off-road modes.
Some Patrol off-road goodies work, some need modifications.
I still off-road it on some milder trails and it’s been problem-free over the past 2 years but it’s not as heavy-duty as the “real” Patrol.
You know how every movie and TV show about criminal organizations has a guy down at the docks that can fudge the paperwork to get anything through customs? How much do we want to bet there are plenty of companies doing the math on fines for bribery of port officials versus actually paying tariffs on their products?
I have a couple Kias and a W126 Mercedes.
Seeing as I’m up in Mooseland, I can probably just buy directly from overseas suppliers, or whatever companies like Parts Avatar already have in the Canuck warehouses.
The answer, for all my cars somehow, is suspension work needs doin’.
I was laid off at the end of 2023, not so much because the company I worked for was having trouble but that there was an edict from top management to cut payroll, something that had happened a couple of times before since the end of the pandemic. A couple of interviews for which a recruiter contacted me didn’t work out – one wanted someone with a different focus and the other had hired someone who started the day I went in – and another was going contacting my references for the job to be placed on hold, at which point my depression kicked into higher gear. Now I’m having to start taking money out of my underfunded 401(k) to survive, and with the market declines it won’t last long, and once it’s gone I’ll have to think hard about where to go and what to do.
John Maynard Keynes (I think) wrote that in the long run we’re all dead. In economic terms this means that completely ignoring current negative policy effects in favor of long-term benefits, even if such benefits are guaranteed (which in this case they most certainly are not), the amount of pain endured to get to that mystical point has to be considered because the people enduring it are living in the present rather than the future.
I’ve read (well. skimmed, so I won’t comment on the validity) claims that government intervention during the Great Depression slowed economic recovery and it would have been better to ride out the pain and emerge into the Promised Land. Even if that were true, which is doubtful, the social wreckage caused by a 25% decline in GDP would have been catastrophic. People would have starved without extended relief. Others who were able to manage to maintain some dignity by working on WPA projects would instead have been adrift. As it was the US saw some troubling political lurches, and worse happened elsewhere.
So. while I really don’t want to get too disruptively political and should have yelled this out when the anti-trans policies were enacted and a indiscriminate chain saw cut through the government without any evaluation of how that would affect service delivery and the Voice of America was shut down because of a question a reporter asked that hurt the presidents fee-fees and legal immigrants were sent off to an El Salvadoran prison even though government lawyers admitted that they had protected status but claimed the court lacked jurisdiction because they were already gone,, to all of you who voted for this administration and its congressional enablers, fuck you with a large and spiked club for doing this to the US and. because of our size, the rest of the world. I can only hope that the havoc you have wrought shows whoever manages to survive all this the value of all the systems and services that run in the background to keep this country going.
Let’s see… ’66 Chevy Biscayne, ’71 Cadillac Sedan deVille, ’82 Jag XJ6, ’88 VW Fox, ’94 Fleetwood, ’95 Ford Escort, ’99 F-250, ’00 E-150, ’00 Jag XK8, ’03 Chevy Trailblazer, ’10 VW GTI, ’12 Chevy Volt, ’14 Chevy Spark. They all need something.
Welp… shit.
Well, water pump and transmission fluid here I come
BMW – did most of the motor work last year, should be good
Toyota Pickup – exhaust, I’m buying a welder soon to solve this
Bolt – nothing
Cadillac – This is the one. Was going to sell it, but I have a kid that will need a car soon. So, it needs: fuel pump, rear differential, power steering pump, clutch. When I get back from vacation, I may just put it up on jackstands, and start dropping everything under the car behind the motor, and get to work. This is my big challenge this summer.
Otherwise, I want to buy another Bolt. The prices are hovering in the mid teens right now. I’m Eagle eyeing it.
Okay, yes, prices on literally everything will go up, unemployment will rise, inflation will get worse, companies will go out of business, the global economy will be devastated, people will lose their homes, thousands will die of diseases we’ve already cured, national parks will be bulldozed, and exports to the US will totally dry up, but at least trans kids aren’t allowed to play sports any more.
mah base spec ram might now be 70k but at least we owned the liberals
Smiling as I die in a cardboard box outside a hospital from a disease they cured in 1905 as I imagine how pissed off a college freshman with blue hair would be at all this.
Chuckling to myself as I spend $35 on a 4 ounce hamburger and fries. It was made in beef tallow because we’re finally a free nation
And in my head I see Mel Gibson in Braveheart yelling FREEDOM during his execution.
While you mentioned it, Season 4 of The White Lotus should be someplace like NYC or Vegas, with the arc being the building of a new White Lotus while the existing one gets downbranded to a Business Gardens Inn and Suites (and the existing one of those downbranded to a SLEEp-EAZY Motel).
It would entirely be about the workers of the different hotels along with the construction crew with the occasional corporate suit. The guests would be like the paper at Dunder Mifflin (to steal a line from Quinta Brunson).