The News
US President Donald Trump’s latest auto tariff announcement — 25% on all cars and some parts from April 3 — will raise prices and wreak havoc on supply chains, analysts warned.
Trump said the duties would force companies to manufacture more in the US: Nearly half of all passenger vehicles sold and 60% of the car parts assembled in the country are imported. Shares in automakers around the world fell sharply on the news, adding to the market turmoil as a result of Trump’s trade policies; the S&P 500 is on track for its worst quarter since 2023, Bloomberg reported.
The announcement comes as new data showed last month’s trade deficit in some goods narrowed, with the value of imports rising — a sign that US companies may be seeking to stockpile foreign-made goods, driving up prices, ahead of further tariffs coming next week.
SIGNALS
US carmakers may be among most hurt by new duties
American auto makers with large inventories of vehicles needing to be sold could benefit from the tariffs pushing up new car prices, but any positive will be “short-lived,” The New York Times wrote: The levies are more likely to “backfire” on the industry, squeezing profits and slowing sales — particularly if other countries retaliate. Carmakers could face up to $110 billion in additional annual costs because of the tariffs, analysts said. Some seem to be waiting to see if the administration blinks: Moving supply chains into the US would take time, and new factories are slow and expensive to build. “Trump’s on-again-off-again levies don’t provide the certainty that automakers need to invest billions of dollars in new plants,” car bosses told CNN.
Tariffs will drive up price of a new car for Americans
Analysts warned that the extra import costs will almost certainly be passed on to customers: Ferrari said Thursday it would raise the prices of some of its US cars from next week. Other automakers could follow: Bank of America has estimated that some vehicles could see a price hike of $10,000, while auto sales could fall by nearly a fifth compared to last year. “Consumers will be losers because they will have reduced choice and higher prices,” an AutoForecast Solutions analyst said. The price of new cars has already risen sharply in recent years due to pandemic-era supply chain disruptions: Now, more households will be priced out of the new car market, an economist told The Associated Press.
Elon Musk’s Tesla could prove an outlier ‘winner’
Apart from “the many losers” of Donald Trump’s new tariffs, “one winner stands out,” Bloomberg noted: Elon Musk’s Tesla already makes all of its cars for US buyers in the US. That reality may be “insulating it to a greater degree.” Tesla’s popular Model Y could be a particular beneficiary: About half of its competitors may be subject to tariffs, analysts said. Still, even Musk has acknowledged that more expensive parts mean “the cost impact is not trivial.” The company’s share price is still down for the year — although it ticked up as other car companies’ saw their stocks fall Thursday.