A flurry of tariff activity took place Wednesday afternoon in the White House’s Rose Garden. That’s where President Donald Trump announced tariffs on many U.S. trading partners, set to go into effect Saturday. On what Trump called “Liberation Day," the automotive industry received a partial respite.
Trump announced that vehicles, auto parts, steel, and aluminum will be exempt from his new reciprocal tariffs. Mexico and Canada’s 25% tariffs on almost all imports are also exempt.
But while automobiles are exempt from the reciprocal tariffs, at 12:01 a.m. Thursday, an additional 25% trade tax went into effect on many imported vehicles. A tariff on auto parts is expected by May 3. Both tariffs were announced on March 26.
The tariffs temporarily do not apply to automobiles or auto parts that qualify for preferential treatment under the United States-Mexico-Canada Agreement, which outlines free trade policy between the three countries.
Trump has said he believes the tariffs will encourage more domestic auto manufacturing and give Americans an advantage in the U.S. market.
Analysts say prices are expected to go up
Auto manufacturers and dealers have scrambled to build up inventory of vehicles, and some analysts believe auto prices will go up soon if the tariffs remain in place.
East Lansing’s Anderson Economic Group, which specializes in automotive industry analysis, is one of those believers. In an April 2 report, the group said the 25% tariff on automobiles is expected to tack on $2,500 to $5,000 at minimum to American cars, though all estimates may vary based on future economic factors.
The report predicted that, in North America, sedans and small crossovers would see an increase of $2,500 to $4,500 in price, while mid-sized cars like SUVs, passenger vans, and some pickup trucks would see an increase of $5,000 to $8,500. Luxury models in North America would see increases of $10,000 to $12,000 due to the tariffs. The most highly tariff-impacted vehicles on the continent would be battery-electric vehicles with a potential tariff cost of over $15,000 for some models, according to the analysis.
The costs would worse still for imported cars, with a potential cost of $8,000 to more than $20,000 added to the bill, according to the report, which said those changes could come within a month.
Erin Keating, executive analyst at Cox Automotive, said her organization expects auto prices to increase almost immediately, mostly because of a surge in demand. The auto industry is generally facing a lot of uncertainty, according to Keating.
“The expectations for the auto industry right now have got to be a period of chaos, for sure,” Keating said. “Almost every automaker and every dealer right now is trying to figure out how to balance their portfolio of vehicles, first and foremost, moving forward.”
In light of the automobile tariffs, Stellantis announced it is pausing production at some Canadian and Mexican assembly plants, effectively placing about 900 U.S. employees on temporary leave, according to The Detroit News.
Lansing Mayor Andy Schor told NPR’s Morning Edition Thursday that an increase in car prices could lead to layoffs and shift reductions in Michigan.
“If people aren't buying cars, then we're not making them,” Schor said. “And if we're not making them, that's going to force layoffs and less shifts, and affect our workers and our economy. So that's a huge concern, especially when our residents make [an] average of $48,000 a year, they can't afford $10,000 more for a new car.”
Mixed feelings on the tariffs
The Trump administration has said the tariffs are necessary because importing high quantities of automobiles and auto parts has threatened the national security of the U.S. The White House has said auto trade in the international market has left the United States at a disadvantage.
“U.S. automakers face a variety of non-tariff barriers that impede access to the Japanese and Korean automotive markets, including non-acceptance of certain U.S. standards, duplicative testing and certification requirements, and transparency issues,” the White House wrote in a fact sheet.
Keating said the U.S. can benefit from interacting with foreign automakers, considering that non-U.S. vehicle makers from other countries have invested in the U.S. She said the automotive industry is global, and has been for decades, making it complicated and integrated.
“It's a little misleading to say that Honda and Toyota have not — or Hyundai, or other foreign manufacturers — have not invested in the U.S. market,” Keating told Michigan Public. “They produce plenty of their vehicles that they sell [in the U.S.]. I think Toyota's as high as 80 or 85% of the vehicles that are sold within the U.S. are made within the U.S.”
The United Auto Workers has a different view on the auto tariffs. The union, one of the largest in the country, said on X that the move will help autoworkers and blue-collar communities.
“With these tariffs, thousands of good-paying blue collar auto jobs could be brought back to working-class communities across the United States within a matter of months, simply by adding additional shifts or lines in a number of underutilized auto plants,” the UAW wrote in a March 26 post on X. “Right now, thousands of autoworkers are laid off at Ford, General Motors, and Stellantis following recent decisions by auto executives to ship jobs to Mexico.”
