What Trump’s auto tariffs mean for car buyers and automakers
Summary
Prices hikes and fewer model options might be coming should the 25% tariffs persist.
President Trump rattled the auto industry Wednesday by saying he would slap 25% tariffs on all imported cars and trucks sold in the U.S., a far more aggressive measure than many in the sector had expected.
Nearly half of all vehicles sold in the U.S. are imported, a figure that equates to about seven million cars, trucks and SUVs purchased by consumers, according to industry data.
Trump said the new car-focused duties would help restore U.S. manufacturing and create American jobs. Auto executives and analysts are skeptical.
Here is what to know:
When will tariffs start to affect new-car buyers?
Within months. Imported cars, SUVs and trucks already in the country, or arriving before next week, aren’t subject to President Trump’s 25% tariffs. Most automakers keep healthy stockpiles in inventory, usually enough to last about two to three months. Some brands such as Honda and Toyota keep tighter supplies.
“We will work through the inventory on the ground, and it’s probably about two months before you start having tariffed inventory at dealers," said Stephanie Brinley, an automotive analyst at S&P Global Mobility.
If sales pick up quickly with consumers trying to get ahead of the tariffs, stock could deplete faster. Even before Trump’s order, U.S. auto sales were on pace to surge 13% in March, owing mostly to people trying to pull ahead on purchases before import duties become effective, according to the research firm J.D. Power.
Will Americans have to pay more for cars?
It is very likely. Car prices are almost certain to increase if the tariffs remain in place. Automakers and parts manufacturers can absorb some of the added costs but not all, and they are likely to pass some increases on to the consumer.
On average, vehicle prices could rise 11% to 12% to offset tariff duties, Morgan Stanley analysts wrote in a note released Thursday.
What other effects could tariffs have?
They could mean fewer models are sold. JP Garvey, a car dealer in New York, said automakers have stockpiled vehicles at ports, but ultimately a hefty 25% duty could limit choice.
Rather than moving production to the U.S. or paying the tariffs, companies could cut affected models from their lineups. “I could see many brands choosing not to bring their import vehicles in," Garvey said.
Are auto tariffs good for Detroit?
Not really. All three Detroit car companies build U.S.-sold vehicles outside the country, including well-known models such as Chevy pickup trucks and Jeep SUVs.
General Motors stands to take the biggest hit from import tariffs because it assembles about 46% of its U.S.-sold cars abroad, primarily in Mexico, Canada and South Korea.
Ford Motor and Jeep’s parent, Stellantis, also build models outside the U.S., and all three automakers get many of their parts from manufacturers abroad.
Bernstein analysts estimate Ford and GM could face up to a 30% drop this year in earnings, even with adjustments to where they source parts. Stellantis, which also owns Ram, Chrysler and Dodge, could be in better shape because its vehicles produced in Mexico contain a higher level of U.S.-made auto parts.
Trump does have one unlikely ally on tariffs: United Auto Workers President Shawn Fain. The union leader was among Trump’s biggest critics during last year’s presidential campaign, but on the matter of foreign-built cars, Fain agreed the U.S. needs to do more to protect the American worker.
“It is now on the automakers, from the Big Three to Volkswagen and beyond, to bring back good union jobs to the U.S.," he said.
What about Tesla?
Tesla Chief Executive Elon Musk said the electric-car maker wouldn’t be “unscathed" by Trump’s 25% auto tariffs. But the stock-market reaction suggests the car company might be able to navigate them better than its American rivals.
Tesla’s stock was little changed in trading Thursday, while shares in GM, Ford and Stellantis fell as investors digested the news of the new import duties.
Tesla might be less affected by the tariffs because of its localized supply chain.
“To be clear, this will affect the price of parts in Tesla cars that come from other countries," Musk wrote on his social-media platform, X. “The cost impact is not trivial."
Trump said Musk, a close adviser to the president and major campaign donor, had no influence on the auto-tariff decision. Tesla builds all its U.S.-sold cars at its factories in California and Texas and has a more-localized supply chain, making its exposure to the new import duties more limited.
Will the German and Asian carmakers suffer?
Yes. While foreign-based automakers have auto plants in the U.S., they still get some portion of their vehicles from outside the country.
Toyota and Honda build many popular models in Canada and Mexico, including the Civic sedan and Tacoma pickup truck. Among some of the hardest hit will be German luxury makers BMW and Mercedes-Benz.
The tariffs could also have an outsize impact on Volkswagen, Mazda, Hyundai and Kia. Hyundai this week marked the opening of a new electric-car factory in Georgia. It has announced plans to build a steel mill in Louisiana to help blunt the impact of new duties.
This explanatory article may be periodically updated.
Write to Christopher Otts at christopher.otts@wsj.com, Ryan Felton at ryan.felton@wsj.com and Sean McLain at sean.mclain@wsj.com
