Contributors

Christian Scali

Founder and Managing Shareholder

Scali Rasmussen founder and managing shareholder, Christian Scali, joined "Forbes Newsroom" to discuss the impact President Donald Trump's tariffs on imported vehicles and expected levy on certain auto-parts could have on the auto industry.

Watch the full interview, or read the transcript below.

Transcript

BRITTANY LEWIS

Hi everybody, I’m Brittany Lewis, a Breaking News reporter here at Forbes. Joining me now is Christian Scali, Founder and Managing Partner at Scali Rassmusen. Christian, thank you so much for joining me.

CHRISTIAN SCALI

Thanks for having me.

BRITTANY LEWIS

I'm really excited to get your perspective today because the majority of the clients you represent are in the retail automotive space. So I would love to get your take here on what tariffs are specifically doing to that industry. As we know, last week President Trump dubbed Liberation Day as a day where he unveiled his widespread tariff policy. Also something that went into effect last week are the tariffs on automobiles, a 25% levy on all imported vehicles. Tariffs on auto parts are expected to go into effect in early May. So to start off the conversation, what's your reaction to the tariffs as they relate to the auto industry?

CHRISTIAN SCALI

Well, it's a big change for sure. I think the, the immediate effect, at least on the consumer is for March and for April, sales are looking to be the highest that they've been in a long time. As some of the dealers and factories are offering incentives to sell some of the existing inventory. The question is, what's going to happen in the medium and long term? I think that's a little bit more difficult to answer, primarily because we don't know how the other countries are going to be responding. It hasn't been determined yet. For example, in the EU they met on Monday, but there's nothing concrete that's been developed out of that meeting. So we don't know exactly what's going to be happening in terms of countermeasures from Europe or if Europe is going to come to the table and try to negotiate with President Trump. Same with Japan. Japan looks like they're sending a delegation to, Washington to negotiate with President Trump. So it's a little too early to tell what the long term effect is going to be.

BRITTANY LEWIS

Overall, Americans over the past couple of days really didn't want to even look at their 401k because of the volatile reaction in the market to President Trump's tariff policy. This morning, Tuesday morning, we've seen a bit of a market comeback, but trillions in market value were wiped out in just a matter of days. Overall, what has been the auto industry's reaction to these tariffs? Has it been largely positive, largely negative? What have your clients been telling you?

CHRISTIAN SCALI

Well, what's interesting, at least from the factory's perspective, it's been all over the map. Different factories are taking different approaches. For example, Stellantis and Ford are offering incentives, employee pricing incentives to people to buy, which is pretty interesting. But you have on the more luxury side of the market. Ferrari, for example, increasing prices. So, it's a little bit all over the map. But then you've got Hyundai, for example, is talking about bringing more of the manufacturing of its vehicles into the United States. So I think it's really, it kind of breaks down to a factory by factory policy.

BRITTANY LEWIS

I know that when I've been talking to economists, they've been saying they don't really understand the why behind the tariffs. Is this President Trump trying to vastly change the economy? Is this President Trump trying to get other company or other countries rather to come to the table to start negotiating? President Trump said these auto related tariffs are quote, reprioritizing US Manufacturing and that President Trump recognizes that increasing domestic manufacturing is critical to US national security. Does the auto industry have this sense that this will help US Manufacturing, these tariffs, at least in the short term?

CHRISTIAN SCALI

Again, I think that depends on who you're talking to within the automotive industry. I certainly don't have any insight personally into what President Trump is thinking. I think it's commendable for the administration to do whatever it can to bring manufacturing back to the US Particularly cities like Cleveland, Ohio could desperately use the revitalization that this could bring. And I also think that properly crafted tariff policy could be a valuable tool to bring auto and parts manufacturing back to the U.S. i also think, and I've heard from some others in the industry that, you know, existing infrastructure coupled with some vast improvements in efficiencies and robotics and as well as the potential passage of the Transportation Freedom act proposed by Senator Bernie Moreno in Ohio could make manufacturing in the US More viable and cost effective than it was when many companies decided to start manufacturing offshore. And I think it could result in some cost savings. But it has to take place place over time. It's not something that can be changed immediately. And I think that even though the announcement caused a wave of consumer demand which resulted in a all time spike in the SAR in new vehicle sales in March and looks like that's going to be happening in April as well with everyone trying to buy a vehicle before the imposition of tariffs for the existing inventory right at the that the dealers have policy of this magnitude I think really requires a scalpel and not a hatchet. For example, the concept of graduated tariffs over time would give the auto manufacturers and suppliers time to retool or build here in the US and factories need time to do that. So I think, I think the approach could have been handled a little more delicately from the standpoint of ultimately getting to the goal. If the goal is to bring back manufacturing to the U.S. i think it's created a lot of volatility in the meantime that we probably didn't need.

BRITTANY LEWIS

I know that the autoworkers union is excited about this. They were supporting President Trump. They applauded the Trump administration for, quote, stepping up to end the free trade disaster that has devastated working class communities for decades. I know that you're saying, hey, there should have been a scalpel, not a hatchet, but there's a lot of volatility now. Do auto dealers and manufacturers, do they get the sense that even though there is that volatility now, in the long term, these tariffs are going to benefit them?

CHRISTIAN SCALI

The dealers are very optimistic about the future. They think that, you know, this is ultimately going to help the US Economy, the auto industry, and for the most part, they're very bullish on it. So I think from the standpoint of the dealers, they're very hopeful that what's going to happen is there's going to be a series of negotiations and the dust will settle and it'll be a reordering of the auto industry, which will ultimately benefit the U.S

BRITTANY LEWIS

When you're saying that there's going to be a reordering of the auto industry, what do you think that looks like? Like in the long term, because we know, we say, we've been saying in this conversation, we don't know what that long term exactly is, but what does that reordering look like?

CHRISTIAN SCALI

Well, I think it's from the standpoint of, of the US Auto industry. I think they think that it's, it's going to result in more manufacturing in the US Stronger US Economy. It can bring prices down without all the excess costs involved in importing.

BRITTANY LEWIS

What's interesting in this conversation is you're saying that dealers saw increased sales in March and April. So I'm curious, is it a good time to buy a car right now? Should Americans go out if they're thinking about buying that car, purchase the vehicle before they see that sticker shock 100%?

CHRISTIAN SCALI

Right now is the best time to buy a car because you're getting a lot of incentives to buy cars There's a lot of inventory that exists here that's not subject to the tariffs because it's already created, it's already made, it's here on our soil. And dealers are, and manufacturers are very eager to make sure that customers are served now before they have to deal with increased prices. Or lack of supply that may result from these tariffs if, if there's no negotiated resolution.

BRITTANY LEWIS

So right now is a good time to get to the dealership. But when are people going to start seeing that sticker shock, start seeing those prices increase? How soon will those tariffs really go into effect where the consumer is seeing that increase?

CHRISTIAN SCALI

It could happen soon. How soon is a question. I know that some of the factories, some of the manufacturers have shuttered their plants in Mexico, for example, and that will create a reduced supply. And, you know what happens typically in a reduction of supply, prices go up. So that could happen pretty quickly. It really depends. And again, it depends on whether there's a negotiated resolution of these tariffs and things change.

BRITTANY LEWIS

I know that you used a really interesting phrase in this conversation that you wished that there was a scalpel used instead of a hatchet. And I've had conversations like that with a lot of President Trump's policies in the first few months of his second term that people have wished from anything from doge cuts to things of that nature. I wish that there was a scalpel used instead of a hatchet. When you're seeing a hatchet used, rather, there's a lot of unintended consequences that come with that sometimes. Are you seeing any unintended consequences come right now in the auto industry related to these tariffs?

CHRISTIAN SCALI

Well, sure, the markets have tanked, right? That's one thing. But I think, yes, you can't, you can't really effectively do an across the board hike like this without unintended consequences. And while at least the dealers in the short term are benefiting from it in the sense of having increased sales right now in March and April, I don't expect that to continue. And I think we haven't really hit yet the unintended consequences of this outside of the market issue.

BRITTANY LEWIS

So then I think we should come back in a month or so and talk about those then when you're seeing people really react to that sticker shock. But until then, Christian SC, thank you so much for joining me. Thank you for your insight. You are welcome back anytime.

CHRISTIAN SCALI

Thank you, Brittany. It was very nice to talk with.you