The introduction of tariffs on foreign-made cars in the US by president Donald Trump will cause “pure chaos” for the global auto industry, analysts at Wedbush have warned.
More details on Trump’s auto tariffs are expected this week. Tariffs are set to be as much as 25% on all foreign cars and parts with the goal of moving auto production to the US.
“We reiterate that the concept of a US car maker with parts all from the US is a fictional tale that does not exist and would take years to make this concept a reality,” analysts wrote in a note to clients.
The analysts project it would take three years to move 10% of the auto supply to the US, costing billions of dollars with much complexity and disruption.
“We believe this adds up to $100 billion of costs annually to the auto industry and will essentially get passed directly onto the consumer and clearly erode demand on Day 1 of tariffs,” they wrote.
“We would also add supplier deals are done for years in advance....and many factories/production hubs could take 4-5 years to build in the US...and this speaks to the massive frustration from the industry as the rules of the US tariff game are untenable in our view.”
The winner from this tariff is no one, the analysts believe. Even Tesla Inc (NASDAQ:TSLA), led by Trump’s ally Elon Musk, will be forced to raise prices, they added.
“We expect to learn more around the details and implementation of this policy on April 2 but for now investors continue to be bewildered by this announcement as this 25% auto tariff number is hard to digest and will continue to put major pressure on General Motors Company (NYSE:GM) and other auto makers/ suppliers globally (including Tesla) until more clarity happens from the White House,” Wedbush concluded.