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President Donald Trump recently announced the possibility of imposing tariffs on cars, which could be a setback for car rental companies.
On Thursday, Hertz celebrated a jump in its stock price of over 20%, while rental company Avis saw its price double that same day.
The rapid growth of these companies occurred the day after the president announced a new 25% tariff on imported cars starting in early April.
'Perhaps some drivers will choose to rent cars instead of buying a new expensive one,' FOX Business correspondent Madison Alworth reported. 'Another compelling reason is that companies like Hertz and Avis sell rental cars on the used car market afterwards.'
The new tariff applies to passenger cars, light trucks, and some auto parts imported into the U.S. from other countries.
It is noted that car importers under the U.S.-Mexico-Canada Agreement 'will have the ability to certify that the content and systems in the U.S. will be used in such a way that the 25% tariff will only apply to the value of non-American content.'
It is noted that the tariff won't apply to rental cars sold on the used car market by rental companies like Hertz and Avis, Alworth reported.
'So today they are more valuable than they were before this tariff announcement,' she said.
In addition to rental car companies, American auto parts manufacturers are also expected to gain more opportunities for repairs and parts supply if drivers decide to keep their existing cars longer, Alworth noted, citing analysts from J.P. Morgan.
'If your car is in repair, what do you do during this Time? You turn to a rental company like Hertz,' she added. 'This also helps these shares.'
The new tariff is expected to take effect on April 2.
Matt Blunt, president of the American Automotive Policy Council, stated on Wednesday that it is 'critical' to achieve that the tariff 'be imposed in such a way as to avoid price increases for consumers and maintain the competitiveness of the integrated North American oil and transportation sector, which has become a key success of Trump's USMCA deal.'
Trump believes that tariffs on cars will force automakers to build more factories and hire more workers in the U.S.
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