Auto tariffs: The good, the bad, and the ugly
Mar. 26, 2025 9:42 PM ET
By: Clark Schultz, SA News Editor
President Donald Trump announced new tariffs on automobile imports on Wednesday. A 25% tariff will be imposed on all vehicles not manufactured in the United States, effective on April 2. The tariffs will initially start at 2.5% and gradually increase to 25%.
The tariffs will apply to both imported cars and foreign auto parts brought into the U.S. While the Trump Administration wants to bring more manufacturing back into the U.S., analysts warn it could take years and tens of billions in capital to completely reorient the supply chain to North American production.
Detroit automakers and foreign automakers have been warning for weeks that tariffs could hurt the industry overall and lead to significantly higher car prices in the U.S. Wedbush Securities analyst Dan Ives put a number on the potential pain. "In our view, these initial tariffs (if they hold in their current form) would be a hurricane-like headwind to foreign (and many U.S.) automakers and ultimately push the average price of cars up $5,000 to $10,000 depending on the make/model/price point," he wrote following the announcement.
RBC analyst Tom Narayan said the tariffs as set will be destructive to the auto industry and a potential disaster to the industry at the 25% level if it were to come to that.
Edmunds analyst Jessica Caldwell warned that many vehicle parts are sourced globally, which would increase repair costs for car owners, and reconditioning costs for dealers. "Insurance premiums will also likely increase as any accidents involving new parts will see increased costs as well," she noted.
Bank of America has a more sanguine view that negotiations could prevent a major auto industry chaos. "We continue to expect that rational economic arguments that protect and maximize US workers and companies will prevail. Ultimately, this would mean not too much disruption to the status quo, but the process to get there could be volatile," highlighted analyst John Murphy.
Tesla (NASDAQ: TSLA) and South Korean automaker Hyundai ( OTCPK:HYMTF) are seen better insulated from the broad tariff battle that is escalating. In terms of share price performance, Chinese EV makers XPeng ( XPEV) and Li Auto ( LI) are the top gainers in the auto sector this year amid the trade war headlines. |
