by A destructive day on April 2 promises to bring new tariffs from the Trump administration.
The automotive industry may manage to avoid the next round of tariffs, but it remains in the crosshairs.
Tariffs on cars and components could increase the prices of new vehicles.
For President Trump and his administration, tariffs remain a relevant topic a day before April 2. Under the name ‘Liberation Day,’ Trump reportedly plans to announce new reciprocal tariffs as a response. Its impact on the automotive industry continues to occupy the minds of executives, but according to sources close to the tense task, the new tariff plan will be more specifically targeted.
Trump has long discussed imposing tariffs on foreign automotive industries, but initially proposed tariffs against Mexico and Canada at the beginning of March.
Initiative for the Automotive Industry
The US President initially stated that car tariffs would be introduced on the same Liberation Day on April 2, but according to information that is currently unclear, it is unclear whether cars will be included in the same ‘Liberation Day’ package.
However, even if the automotive industry is spared from the latest announcement, it does not mean that executives can relax. Trump’s ongoing criticism towards countries like South Korea, Germany, and, particularly, for their trade practices clearly puts automakers in the line of fire.
For the global automotive industry, which relies heavily on international supply chains, even the thought of protectionism poses a significant challenge. Cars assembled in the US often contain parts that originate from dozens of different countries. Tariffs on these components can increase production costs, raise prices, and slow consumer demand. For manufacturers with international manufacturing operations, this can become a logistical and financial nightmare.
Tariffs as a Source of Revenue?
Instead, Trump suggested that imposing tariffs should not only be an economic tool — the US President anticipates that they could become a source of revenue. The idea that tariffs could collect trillions of dollars for the US economy was proposed by his team and compensate for the proposed tax cuts.
However, while this may sound attractive economically, there’s one issue: this accounting is ultimately paid by consumers. When the US imposes tariffs on imported goods, these costs are usually passed on to consumers in the form of higher prices. Thus, the authorities collect revenue, but the financial burden is felt by the consumer.
In any case, it seems that domestic auto manufacturers do not broadly share Trump’s optimistic view. Ford CEO Jim Farley expressed the opinion that the threat of tariffs could cause chaos, but ultimately believes that Trump aims to strengthen the US automotive industry. Then, on March 5, Trump announced that after discussions with the three major automakers, his administration would postpone the imposition of tariffs on Mexico and Canada.
