Trump tariffs – what they mean for the collectors’ car market

The dust is settling on the thorny issue of new tariffs for classic cars sold from outside the US to collectors inside North America. For now, at least.

The existing duty rate is 2.5% and that remains for models built over 25 years ago. The threat of an additional 25% tariff has abated but will apply to newer cars delivered within that 25-year timescale.

So far, so good, for owners and would-be owners of a Mercedes-Benz CLK-GTR, McLaren F1, Porsche GT1, Ferrari F50 and older. Models such as the Ferrari Enzo, Porsche Carrera GT and Bugatti Veyron, if imported to the US, will now be subject to the extra 25%. Which immediately makes cars in this category already there more valuable. It also raises the possibility of new, must-have limited-edition supercars only available to modern manufacturers’ “best clients” becoming a lot more expensive, worsened by the requirement to buy the full catalogue of less desirable models before “best client” status and eligibility to own the latest Holy Grail is achieved.

Does anyone have much sympathy with the latter? No, not really. But it’s an extra complication in the movement of often unregistered cars, undriven, sometimes in customs bond and liable to local VAT on top of the purchase price if their final destination is Europe. It will affect the international auction market and be an extra factor to add to ‘show and display’ rules in some states. One US dealer told us he regretted recently selling his 2010 Porsche 911 Sport Classic – to bring one into the country now will be another 25%.  The new ‘modern classic’ market for Porsches and Ferraris will be affected, potentially raising values for cars already in the country.

American specialist in vintage cars Mark Hyman is relieved there is some certainty in the market and views the overall picture as more nuanced:

“I believe that when the tariff discussions began a few weeks ago that there was a period of ‘wait and see’ which put a hold on transaction volume until Trump’s policies were made clear and definitive. That said, now that it has been shown that vintage cars have been excluded from the new tariffs, the United States is back in the import business.

“The American market is quite large and there’s a good supply of quality vintage cars here in the states already, but the strong dollar has made it advantageous for Americans to buy overseas once again. The vintage car market has always been a global one, and it continues to be so. Exchange rate fluctuations and changes in trade policies are factors to watch but it seems we dodged a bullet this time.”

Mark Leonard of sports and racing car dealer Grand Prix Classics is in broad agreement. “In the car world it will not affect the import of older vehicles. They will still come in for 2.5%. Trade will be as usual. With a strong dollar the USA will be able to purchase cars from the UK and EU. For new cars many of the manufacturers already build their cars in the USA. It will affect those that do not.
 
“It might change the value of some of the rare new cars already in the USA that would be subject to the tariffs. These tariffs are often a negotiating tool to get a better trade deal. They could change once the countries negotiate a more balanced trade.”

There is a certain sympathy within the North American specialist car business with Trump’s actions. Martin Button, Global Brand Ambassador for CARS Worldwide and a long-time expert in importing cars into the United States, comments that: “We have traditionally levied a 2.5% duty on cars entering the United States. However, European nations have traditionally imposed 10% duties on US cars exported to Europe. Our government has been trying to correct that imbalance, to no avail, since Bill Clinton was President, so this is nothing new.”

When the president issued an executive order on 26 March announcing 25% tariffs on imported cars and certain car parts, alarm bells rang. It was unclear if older cars were included. Fearing the worst, the industry went into overdrive to ship cars over and clear customs before the likely cut-off in May. Button again: “Ever since this was announced, we have been working our tails off flying every car possible into the US to beat the tariff trigger date. Whether the tariff applies depends on when the car clears Customs.” We now know 25-year-old cars are now exempt from the extra 25%.

Dedicated car business attorney John Draneas raises another issue: “The executive order applies not only to cars but also to certain auto parts. There isn’t much clarity yet on what parts are covered. Obviously, to the extent that parts become more expensive, automotive repairs and restorations are going to cost more. Similarly, crash repair costs will go up. And when that becomes significant, insurance premiums are going to go up as well.

“More subtly, it should be expected that tariffs on replacement parts will reduce the number of parts available for purchase. That will lengthen repair and restoration times, in some cases dramatically. When the repair is a consequence of a crash, the resulting loss of use claims will be larger, given the longer down time. That can add even more pressure on insurance premiums.”

Perhaps the most serious effect of the blizzard of tariff pronouncements and inter-country horse-trading has been the dramatic drop in the value of stocks. The S&P 500 fell nearly 14 per cent from end-March to mid-April before recovering in recent days but is still off its peak. Over 12 months, it’s back to what it was last August. Those with investments, particularly pensions, notice the former rather than the latter and will feel less well-off now as a result of presidential actions, even if they do not sell and realise the loss. It’s unsettling and creates uncertainty that is never good for the market. We have already seen that at local level at Bonhams’ recent Goodwood auction.

This one will run and run. As an American political commentator drily noted, “Three months down, only another forty-five to go.”

With thanks to Mark Hyman and Mark Leonard

Photo by Alamy