Given his background as a reality television star, President Donald Trump knows how to tease an audience. Speaking before a group of auto industry executives and workers in Michigan last week, the president promised a “very big announcement … having to do with your industry” in the days ahead.
He wasn’t about to tip his hand.
“Let’s keep them guessing back there,” he said, referring to the throng of journalists.
He did go ahead and make a couple noteworthy announcements, though, ordering a review of fuel economy standards established under President Barack Obama and promising to redo the North American Free Trade Agreement.
Whatever presidential proclamation comes our way next week, it’s worth noting the auto industry has experienced two consecutive years of record sales. And since Trump’s election, the stocks of General Motors and Ford have roughly tracked the overall S&P 500 – GM has done slightly better, Ford slightly worse.
The business of selling cars and trucks to Americans, though, could be getting more difficult. With the Federal Reserve’s raising of interest rates, borrowing money for auto purchases will likely become more expensive. A record amount of subprime auto loans were dished out last year, and already some of the high-risk borrowers who took them are having a tough time making their payments. Late last year, New York Federal Reserve economists estimated 6 million subprime car buyers were at least 90 days’ late on their loans.
The auto industry has a huge impact on the broader economy. The Center for Automotive Research has estimated every job with an automaker is worth another seven. Record auto sales come with other spending – from accessories to sales taxes.
So the president’s coming announcement isn’t just for auto industry watchers. It’s for all of us.
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of “Nightly Business Report” on public television. Follow him on Twitter @HudsonsView.