Trump Tariffs: Stop Making Sense

I, who took the money?

Who took the money away?

- “Stop Making Sense” Talking Heads

The NAFA Fleet Management Association, formerly known as the National Association of Fleet Administrators, got the second day of its latest event in Long Beach last week. off to a rousing start with a panel discussion led by executives from Holman entitled: “Navigating the Storm: Tariffs and Their Impact on Fleet Operations.”  Predictably, the news was not good and the message seemed, in sum, to be: new and used vehicles will be more expensive and scarce; they will be more expensive to own, operate, insure, and repair; there’s not much you can do; everything is in flux.

The three Holman executives on the panel – Peter Nogalo, Manager, Industry Relations; Sean Otterberg, Director, Business Development; and Ed Powell, Director, Consulting Services – were joined by Michael Parr, Senior Advisor, Hillstaffer.  The Holman representatives shared their practical insights regarding early hints of potential tariff impacts from their own experiences. The prevailing message appeared to emphasize prolonging the life of vehicles already in the fleet in the face of growing uncertainty.

The company also touted its “Tariff Tracker,” a series of blogs with regular updates on the Holman Website.

“Tariff Update: Raw Materials & Fuel” - https://www.holman.com/resources/tariff-update-raw-materials-fuel/

“Tariffs Explained: Forecasting the Fleet Impact of Potential Tariffs” - https://www.holman.com/resources/tariffs-explained-forecasting-the-fleet-impact-of-potential-tariffs/

Michael Parr made the most game effort to explain the tariff travails up to last week and in advance of adjustments which were yet to be announced at the time of the panel discussion.  Those updates were announced after the panel and modified tariffs on car parts took effect today.

There are exceptions for parts subject to the USMCA (United-States-Canada-Mexico Agreement) as well as based on local content and exemptions from steel and aluminum tariffs, where appropriate.  The universal expectation in spite of exceptions and exemptions is that vehicles, vehicles parts, repairs, and insurance will all see price increases.  The purpose of the tariffs, as stated by the Trump Administration, is to reshore American jobs in all sectors, not just automotive.

The most notable piece of tariff explication from Parr was the contextual insight that the Biden Administration’s Inflation Reduction Act (IRA) legislation was itself intended to reshore American manufacturing jobs and was already showing success prior to President Trump's electoral victory for both battery and semiconductor manufacturing.  The immediate result of the declared Trump tariffs was the termination of plans for upwards of $6B earmarked for domestic electric vehicle battery production.

The clear conclusion was that the very unpredictability of the Trump Administration and its on-again off-again trade policy was unlikely to instill sufficient confidence to inspire investment in domestic production.  The immediate impact was a massive setback to domestic electric vehicle production undermining the global competitiveness of the U.S. auto industry.

As for fleet operators, the advice appeared to point toward hunkering down and battening down the financial hatches in anticipation of a tariff-enhanced storm.  Given that the panel discussion took place at 7:30 a.m. last Tuesday, it was an effective eye opener.

It also foretold the conversation that followed between senior fleet executives from Ford Motor Company, General Motors, and Stellantis.  Eric Swanson, Vice President for Commercial Sales in the East Region for Stellantis, summed it up best, sharing that his communication department had agreed to allow him to characterize the market as “a fluid situation that we’re closely monitoring” - a comment that produced knowing chuckles on-stage and from the audience.

All three Detroit auto maker representatives noted their struggles with existing vehicle availability and concerns regarding tariff impacts on costs across the supply chain.  There was no good news to be had.  I have to tip my hat to the NAFA organizers regarding their willingness to confront the evolving tariff situation at the top of their agenda.  It was clear that there was no work around, no short cut, no hack, no deal, and no certainty other than uncertainty.