Here’s What Trump’s Tariffs Could Do to the U.S. Auto Industry
Increasing production at existing plants and building new ones, moreover, represent big corporate commitments. Those generally require a high level of certainty about what policies will be in place over the coming months and years. The Trump administration, by contrast, has announced and rolled back tariffs at a rapid clip, maximizing chaos. Although some automakers, like Ford, have said they’ll lower prices in response to tariffs, manufacturers are likely to pass at least some of the cost of tariffs on to consumers, adding potentially thousands of dollars to the cost of new cars. Autotrader predicts that the cost of new foreign cars currently priced at less than $40,000 could increase by as much as $6,000. Higher prices are likely to lead to lower sales, and the prospect of a recession—heightened by stock market turmoil this week after the “Liberation Day” announcements—could make companies and investors wary of spending billions of dollars responding to tariffs that might not exist in a month or a year. That might also make them less willing to invest in lines of business where they’ve so far struggled to earn profits, including electric vehicles. “Think about a world where we’re spending billions in capital, and then it ends. We can’t be whipsawing the business back and forth,” GM CFO Paul Jacobson told investors in February when discussing the tariff prospect.
An economic downturn in the U.S. may pose unique risks to Ford and GM, which sell the vast majority of their vehicles domestically. During the last financial crisis—when the government bailed out and briefly took ownership stakes in GM and Chrysler, now owned by Stellantis—foreign markets buoyed declining sales in the U.S. Since that time, legacy U.S. automakers have largely stopped selling compacts and sedans and have withdrawn from international markets; in December, GM announced that it was writing down the value of its business in China by more than $5 billion amid mounting losses there to Chinese companies such as BYD. That U.S. automakers’ sales are so heavily concentrated around selling trucks and SUVs in the U.S. could make them less nimble this time around, especially if penny-pinching consumers opt for smaller, cheaper vehicles now made primarily by foreign automakers. As happened during the recession too, automakers are liable to use any pressure on their bottom lines as an excuse to lay off more workers in the name of efficiency, undermining wages and working conditions.
“If North America has a downturn—or if the U.S. has a downturn—they don’t have another market as strong as this one to offset” losses here, Brinkley said. “If that market is struggling, it’ll have a different kind of an impact” than in 2008. There’s no way of knowing what exactly the future holds, either for the U.S. auto sector or the economy as a whole, of course. While some are optimistic that Trump’s tariffs will rebound in autoworkers’ favor, the next few months will almost certainly find the industry wading through uncharted, potentially dangerous waters.