Donald Trump’s newly announced tariffs on cars and auto parts from Asia, Europe, Canada and Mexico are set to deepen uncertainty for the country’s ailing automotive industry, with manufacturers warning that supply chain disruption and rising costs are likely to hit consumers hard.
Effective from April 3 – at least, according to the latest remarks from the administration – the fresh round of levies comes on top of existing 25% tariffs on imported steel and aluminium.
Estimates suggest the tariffs could add between US$3,500 and US$12,000 to the cost of a new vehicle.
No time to pivot
While Trump argues the tariffs will encourage automakers to move production back to the US, industry leaders say such a shift cannot happen quickly, if at all.
Manufacturers say the lack of clarity around whether the tariffs are permanent further complicates investment planning.
Building new facilities or reshoring supply chains would require years and billions of dollars – commitments automakers are reluctant to make in an unpredictable policy environment.
American-based automakers have built complex, cross-border supply chains under the assumption that trade within North America would remain free under the US-Mexico-Canada Agreement (USMCA).
Many components used in US-built vehicles originate in Mexican and Canadian factories.
No incentives, just tariffs
Under the new tariffs, even cars assembled domestically will face higher production costs due to duties on imported parts, which undermines the goal of lowering reliance on foreign supply chains.
Industry executives also point to limited capacity at existing US plants and the long timelines needed to retool factories or build new ones.
Even announced plant re-openings, such as Stellantis’ Belvidere, Illinois facility, will not come online until 2027.
Despite Trump’s claims of a wave of new plant announcements, few are confirmed.
Many of the projects currently under construction were initiated under the Biden administration’s Inflation Reduction Act, which provided federal incentives for electric vehicle and battery production – a program Trump has vowed to roll back.
In the meantime, higher commodity prices – driven by restricted imports and rising domestic demand – are already affecting margins.
Steel prices have jumped over 30% in the past two months, while aluminium is up around 15%.