President Trump plans to place a 25 percent tariff on foreign auto imports to build domestic auto manufacturing and raise $100 billion in revenue. But this move could cause problems for U.S. automakers who depend on global supplies.
President says Auto Tariffs will raise $100 Billion
On March 27th, U.S. President Donald Trump revealed his plans for a 25 percent tariff on imported automobiles, causing a stock loss to major automakers and straining America’s ties to some allies. The tariffs, which the President says will raise $100 billion in revenue per year will also raise the prices on foreign materials and auto components that will drive the cost up on American autos.
President Trump suggests that the tariffs, which begin in April, will lead to more new factories by foreign auto manufacturers being built and staffed here on U.S. soil. However, shares of General Motors stock fell by about five percent after this announcement and Ford stock dropped by two percent. Meanwhile, Tesla stock prices were up after the announcement.
Which Automakers will be Hit the Hardest?
These new tariffs will hit foreign automakers hardest, focusing on cars not assembled here, but U.S. companies will suffer as well since they often use foreign components in their cars. Auto industry analysts suggest that the tariffs will cause the average new vehicle price to rise by several thousand dollars.
Big winners in the electric car segment include Tesla, which uses 80 percent or more component made in America. In fact, the Model 3 Performance manages 87.5 percent of all manufacturing and construction here domestically. Ford will also likely do well, with 80 percent of its parts for the Mustang Mach E manufactured here.
Honda and Jeep use about 76 percent of domestic parts for their hybrids and EVs, while Volkswagen uses 75 percent domestic parts as does Chevrolet. U.S. automakers that will be the most affected are General Motors that produces about 40 percent of its U.S. vehicles in Mexico and Canada. However, the President says that vehicles produced under the U.S./Mexico/Canada Agreement will receive special consideration.
Autos make up 28.3 percent of all Japanese exports and car companies that will likely be the hardest hit will include Mazda, Nissan, Hyundai, and Subaru. Interestingly, of the vehicles they sell in America, Volvo, Volkswagen, Hyundai/Kia, Mercedes, BMW, and Toyota make less than half of those vehicles here.
When talking about cars made by U.S. companies, it is fascinating to note that the Ford Maverick and Chevy Blazer are imported here. The President calls these new auto tariffs a defining policy in his presidency that will help relocate vehicle production to the United States and help to reduce our budget deficit. Summing up his auto tariffs directive, Trump concluded, “This is permanent!”
