President Donald Trump’s 25% tariffs on imported cars went into effect last Thursday. The import tax has already triggered major moves by automakers, from layoffs to pauses in car shipments and price increases.
As a result, industry analysts expect consumers to see higher prices, which has led some buyers to visit dealerships in an effort to avoid a future price shock.
Starting May 3, the tariff will also apply to car parts, such as engines and transmissions, which could drive up the cost of cars assembled in the U.S.
The Trump administration has presented a number of reasons for these tariffs, but stated that its main goal is to boost U.S. manufacturing.
The White House said foreign companies would absorb the costs of the tariffs. But a study by the National Bureau of Economic Research, a nonpartisan nonprofit organization, found that this was not the case during Trump’s first term — when costs were primarily passed on to U.S. businesses and consumers.
Job Cuts in Midwest Factories
Stellantis, which manufactures Jeep, Dodge, RAM trucks, and Chrysler, announced a temporary halt in production at some of its assembly plants in Mexico and Canada. As a result, the company said that 900 people would be temporarily laid off at various plants in Michigan and Indiana.
Stellantis’ North American COO, Antonio Filosa, said in an email to employees on Thursday that while the company continues to assess the medium- and long-term effects of the tariffs on its operations, immediate layoffs and production pauses “are necessary, given the current market dynamics.”
Luxury Car Manufacturer Halts Shipments to the U.S.
Jaguar Land Rover announced it would halt shipments of its British cars to the U.S. this month while it evaluates long-term plans.
“The U.S. is an important market for JLR’s luxury brands,” the company said in a statement via email on Saturday. “As we work to address the new trade terms with our business partners, we are enacting our planned short-term actions, including a pause in shipments in April, as we develop our medium- to long-term plans.”
Buyers Rush to Avoid Tariffs
As automakers assess whether to raise prices, buyers appear to be taking advantage of pre-tariff prices. South Korean company Hyundai reported record sales of its cars last month — its second-best sales month in the company’s history. The automaker has been ramping up production in the U.S. — not in response to the new tariffs, just a happy moment, executives say — which should shield them from some of the import taxes. A spokesperson for Toyota said the Japanese automaker also saw sales increase in late March due to increased customer traffic at dealerships.
While dealerships typically receive a boost in the spring season, aided by consumer tax refunds, there is some data to support a tariff-fueled rush: a survey conducted in late March by market research firm AutoPacific found that 18% of new vehicle buyers in the U.S. planned to make their intended car purchase earlier to avoid potentially higher prices resulting from tariffs.
Market research firm Cox Automotive predicts that cars affected by the tariffs could see prices rise by 10 to 15%.
And the price increases may not stop there. The industry expects another wave to come when tariffs on auto parts go into effect. Imported auto parts account for 40-80% of cars made in the U.S. and 20-40% of the retail price of the final product.
In other words, no matter where they are made, car prices are going to rise.
Source: NPR