US auto manufacturers face significant challenges from President Donald Trump’s new 25% tariff on imported cars, which kicked in on Thursday. The tariffs are aimed at reviving American manufacturing jobs but will likely increase the cost of vehicles, particularly for those assembled at US factories that use foreign parts.
Former Ford CEO Mark Fields warns that automakers will pass on the costs to consumers through higher prices and reduced incentives. Bank of America estimates that a 25% tariff on all imported auto parts could increase the cost of US-assembled vehicles by $26 billion, or around $3,285 per vehicle on average.
The impact on US auto sales is uncertain but could be significant. If automakers pass through the entire 25% tariff to consumers, US auto sales could tumble by about 20% of current annual sales trend, according to Bank of America estimates. Even if they aim to break even by passing along only 15% of the tariff cost to consumers, auto sales would still drop by around 2.5 million.
The White House claims that the tariffs will increase US auto production and jobs but may not necessarily be beneficial for workers in the industry. Some US suppliers might struggle with supply chain disruptions if assembly plants in Mexico or Canada shut down due to tariffs.
To mitigate some of the increases, Ford announced it will lower prices on its cars by offering employee pricing to all consumers from April 3 to June 2. However, it’s unclear whether customers can stomach higher prices when car prices are already near all-time highs.
Experts warn that shifting production to the US may be challenging due to labor costs and worker availability. Bank of America estimates that automakers could relocate some production to existing US plants but this would likely add significant costs.
The Chinese manufacturers, however, may benefit from Western automakers’ struggles with tariffs, according to former Ford CEO Mark Fields. The largest beneficiary is likely to be one of the biggest trade targets of Trump, who will keep innovating while Western automakers manage the tariff costs.
Source: https://edition.cnn.com/2025/04/03/business/car-prices-tariffs-trump/index.html