Consumer Credit and the Incidence of Tariffs: Evidence from the Auto Industry

Kristine W. Hankins, Morteza Momeni and David Sovich

American Economic Review, 2026, vol. 116, issue 2, 627-73

Abstract: Captive finance subsidiaries create a channel for trade policy to affect consumer credit. Examining the impact of the Trump administration's metal tariffs on captive automobile lenders, we find that consumers received higher interest rates from captive lenders after the tariffs relative to unaffected noncaptive lenders. Further, we document a disparate impact on low-income borrowers and in areas with less lending competition. Our results suggest that tariffs may impact not only the price of goods but also the financing terms of purchases. Thus, focusing solely on directly affected product prices may underestimate tariff pass-through significantly.

JEL-codes: F13 F14 G21 L22 L61 L62 (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1257/aer.20230432

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