Trump’s auto tariffs expected to cost industry over $100 billion, with millions fewer cars sold
Despite the on-off nature of President Donald Trump’s tariffs on U.S. trading partners, among those that still stand is the 25 percent import tax on imported vehicles that went into effect on April 3.
Wall Street and automotive industry analysts foresee massive global implications for the industry if these tariffs remain in place, with vehicle sales plummeting by millions as prices for both new and used cars surge, according to reporting by NBC News.
Research reports put the increase in costs for the automotive industry due to Trump’s tariffs in the region of $100 billion, with Boston Consulting Group putting the upper range at $160 billion for both U.S. and non-U.S. manufacturers.
“What we’re seeing now is a structural shift, driven by policy, that’s likely to be long-lasting,” Felix Stellmaszek, BCG’s global lead of automotive and mobility, told CNBC.
“This may well be the most consequential year for the auto industry in history — not just because of immediate cost pressures, but because it’s forcing fundamental change in how and where the industry builds.”
In the U.S. alone, automakers could see costs increase by $107.7 billion, according to the Michigan-based think tank, the Center for Automotive Research. That figure includes $41.9 billion for the big three U.S. automakers — General Motors, Ford, and Stellantis, the parent company of Chrysler.
These reports take into account both the 25 percent tariff on imported vehicles that went into effect almost 10 days ago, and the forthcoming 25 percent tariff on auto parts that begins on May 3.
While manufacturers will bear some of the costs themselves, they are expected to pass most on to customers, American drivers. This will, in turn, depress sales.
Goldman Sachs believes new vehicle prices could rise by approximately $2,000 to $4,000 over the next six months to a year to reflect the new tariffs, but with Americans buying fewer cars as a result, the automakers will have to absorb some of the costs themselves.
Consumer sentiment has worsened more than anticipated this month, and the University of Michigan’s expected inflation level survey reached its highest level since 1981.
While advisory firm Telemetry estimates automakers have approximately a two-month supply of non-tariffed vehicles to sell before any price increases kick in, the longer-term view is that annually there could be 2 million fewer vehicles sold in the U.S. and Canada.
Fewer vehicle sales are not just a result of the specific tariff on imported cars. Other tariffs will drive up the costs of other products for American consumers — from food to clothing to furniture and housewares — limiting spending power when it comes to a new vehicle.
Whether fresh off the production line or used, prices are already high. This affordability crisis has been a problem for some time, with the average price of a new vehicle already over $50,000.
More reasonably priced models are almost exclusively manufactured overseas — principally in Mexico, Canada, South Korea, and Japan — and therefore subject to tariffs and price hikes.
