Trump’s Tariffs Could Crush US Auto Industry — And Nearly Half Of American Consumers With It
- New tariffs could disrupt more than $300 billion USD in annual US automotive trade with Canada and Mexico.
- Vehicle costs might rise by $4,000 USD (~$6,000 AUD) for standard cars and up to $12,000 USD (~$19,000 AUD) for some models.
- Car prices, which are already at a record high of $50,000 USD, will become unaffordable for 40% of Americans.
The US automotive industry might soon face a financial gut punch, and this time, it’s not due to supply chain issues or semiconductor shortages but because of US President Donald Trump’s latest actions. Trump has proposed a 25% tariff on all imports coming from Canada and Mexico, and this decision could push car prices up by as much as $12,000 USD (~$19,000 AUD), making the American auto industry the first casualty in this escalating trade war.
Tariffs Trigger Supply Chain Chaos
Trump’s new policy isn’t just about import duties — it also increases metal tariffs and this could send panic throughout the industry. Because of the elimination of exemptions on metal tariffs (25% on steel and 10% on aluminium) and the increase of the levy on aluminium to 25%, US automakers now face a 50% combined duty on steel and aluminium that is imported from Canada and Mexico.
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Both countries are key suppliers, and this move threatens to disrupt more than $300 billion USD in annual US automotive trade with its neighbours and upend a supply chain that has been running smoothly for decades.
According to an analysis by Anderson Economic Group, the cost of building a standard crossover utility vehicle will increase by at least $4,000 USD and for electric vehicles, the impact could be three times that amount. Popular models like the Chevrolet Silverado pickup and Ford Bronco Sport SUV may even see price hikes approaching $10,000 USD — bad news for an industry already grappling with affordability concerns.
Industry and Consumer Impact
The timing of these tariffs couldn’t be worse. Car sales are already taking a hit and January has seen the largest drop in inflation-adjusted consumer spending in nearly four years. New car prices have skyrocketed 34% since 2019, which has pushed the average cost to $50,000 USD. Meanwhile, used car prices are also expected to rise as fewer people can afford to trade in their vehicles.
Venkatesh Prasad, who is the senior vice president of research at the Center for Automotive Research, has told the AP about the growing affordability crisis, saying that a decade ago, only the lowest-earning 20% of Americans couldn’t afford new cars, but today, that number has doubled to 40% of the population.
Trump is convinced that these tariffs will encourage manufacturers to shift production back to the US and has linked the policy to broader issues like immigration control and fentanyl trafficking.
But analysts dispute this argument, pointing out that out of the 21,000 pounds of fentanyl seized last year, fewer than 50 pounds were caught entering from the Canadian border. Regarding efforts to strengthen domestic manufacturing, they fear that higher costs will lead to increased production expenses, which will drive up car prices. As a result, fewer consumers may buy cars, leading automakers to cut production, which could ultimately result in thousands of job losses in the automotive sector.
