The tariffs, scheduled to take effect on April 2 for vehicles and later for parts, are part of Trump's broader strategy to boost American manufacturing and protect domestic industries. However, the decision has drawn sharp criticism from global trade partners, industry leaders, and economic analysts.
Trump has framed the tariffs as a measure to stimulate domestic car production and create jobs in the United States.
"If you build your car in the United States, there is no tariff," Trump stated during a press conference, emphasizing his goal to encourage companies to shift operations to American soil.
He further claimed that the policy would lead to "tremendous growth" in the domestic car industry.
However, experts predict a different outcome. Analysts warn that the tariffs could disrupt the industry, increase vehicle prices, and temporarily shut down car production lines due to the reliance on foreign-made parts.
A study by the Anderson Economic Group estimates that the cost of vehicles in the U.S. could rise between $4,000 and $10,000 per car. The tariffs are expected to impact both foreign automakers and American manufacturers who depend on imported components.
The U.S. imported approximately eight million cars in the last year, accounting for $240 billion in trade.
The top suppliers of vehicles to the U.S. include Mexico, South Korea, Japan, Canada, and Germany. Additionally, many U.S. automakers have significant manufacturing operations in Mexico and Canada, benefiting from long-standing trade agreements.
While tariffs on Canadian and Mexican car parts will be temporarily exempted as the U.S. Customs and Border Protection establishes a duty assessment system, the move still threatens trade relations between the nations.
Market response
Following the announcement, shares in major automakers fell sharply. General Motors' stock slid by roughly 3%, while Stellantis, the parent company of Jeep and Chrysler, dropped by 3.6%. The Japanese auto industry also took a hit, with shares in Toyota, Nissan, and Honda all declining amid uncertainty over potential retaliatory actions.
Tesla CEO Elon Musk acknowledged that the tariffs would also impact his company, stating on social media that "the tariff impact on Tesla is still significant."
Industry leaders, including the American Automotive Policy Council, have urged the administration to reconsider, warning that higher production costs could lead to job losses and decreased consumer demand.
International leaders have condemned the tariffs. Canadian Prime Minister Justin Trudeau labeled them a "direct attack" on Canada's auto sector, while European Commission President Ursula von der Leyen stated that the European Union would review the measures before deciding on a response. Japan's Prime Minister Fumio Kishida suggested that his government would explore "all options" in reaction to the tariffs.
For American consumers, the tariffs are expected to result in higher car prices. Industry experts predict that dealerships may increase prices on existing stock, even before new tariff-affected vehicles arrive.
Additionally, a decrease in vehicle availability due to reduced production could drive prices up further, mirroring trends seen during past supply chain disruptions, such as the 2021 semiconductor shortage.
Wycliffe Nyamasege
