Recently, the Trump Administration announced a 25% import tariff on vehicles and auto parts imported to the USA. While a rising import tariff encourages local production, this particular decision could have many possible downsides. Both consumers and car manufacturers will notice a market disruption.
According to industry experts, the new auto tariff will increase vehicle manufacturing or production costs. Therefore, buyers will have to purchase the vehicles at a higher price. This decision may lead to financial hardship for the “would-be” car buyers in the USA.
Abby Stamp, an Oxford Economics analyst, said in his research note, “While the import tax aims to encourage local production, there is a potential risk of losing momentum for the local producers. Both small and large-scale automobile companies will face the heat due to the rising taxes. Nevertheless, a higher selling price will also reduce the market demand for many vehicles. As a result, it can be a two-way sword for the car manufacturers or sellers.”
As per the executive orders, the new tariff on passenger cars and light trucks will be effective from April 3rd, 2025. This could typically increase a car’s price between $5000 and $10000. So, which are the car brands that are likely to be affected due to the new auto tariff? Let’s explore some of the brands below.
1. Tesla
Tesla CEO, Elon Musk, who happens to be a close ally of US President Donald Trump, said on his X handle that the new tariff will affect the company’s American-made electric vehicles to a large extent. He further mentioned that the decision will increase vehicle manufacturing costs since Tesla imports various car parts from other countries. He remarked that the cost impact is not trivial.
According to industry experts, Tesla could be the least affected car manufacturer due to the auto tariff introduced by the Trump administration. However, the manufacturer relies on China for sourcing the EV batteries. Therefore, there could be a significant impact on the EV prices manufactured by Tesla.
2. General Motors
General Motors has been regarded as one of the biggest automobile manufacturers in the USA. Headquartered in Detroit, this auto company manufactures 45% of the vehicles for US customers. The company has a significant investment in Mexico and Canada. Nevertheless, it sources various car parts from different countries. As a result, the new auto tariff introduced by President Trump can put the production cost of GM vehicles in jeopardy.
3. Stellantis
Stellantis has introduced top cars such as Jeep, Dodge, Chrysler, Ram, and more. The company sells 70-75% of its vehicles to the US consumers. The new auto tariff will impact the company’s production cost to a large extent. According to industry experts, the RAM truck from this manufacturer costing around $80,000 could cost around $100,000 due to the new policy introduced by the Trump administration.
4. Ford
Ford is a globally known automobile manufacturer, depending on selling 80% of its vehicles in the US market. Imposing import taxes on Ford will also increase the company’s production cost since it sources various parts from China and other countries.
5. Toyota and Honda
Toyota and Honda, well-known Japanese automobile makers, also have a large market share in the USA. These companies make significant revenue by selling their vehicles to US consumers. However, the new tariff will create a jolt for them since the import duty on the auto parts will be high. In such a scenario, the cost of vehicles will eventually rise, which will repeal some of the potential buyers.
Bottom Line
The Trump Administration has strictly released an advisory for automobile brands, stating that the companies should not increase vehicle prices due to an increased manufacturing cost. Besides the manufacturing cost, the average insurance cost may also rise due to the new tariffs on automobile imports. Overall, the decision is all set to create some significant market disruptions. Along with the US car economy, the global automobile industry may feel the disruption to some extent.
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