The automotive industry in the United States stands on the brink of significant upheaval as President Trump threatens to impose a 25% tariff on imported cars. This move could escalate the cost of vehicles, impacting both consumers and manufacturers. Automotive experts warn that tariffs could add thousands of dollars to car prices, a situation compounded by the intricate global supply chain that defines modern auto production.
Currently, U.S. dealerships see a varied supply of vehicles, ranging from Toyota Motor's 25-day supply to Ford Motor's 73 days. Despite having manufacturing plants across the country, no vehicle is entirely American-made. The Ford F-150 pickup, for instance, comprises less than half of its parts from U.S. factories. This reality underscores the complexity of auto production and the challenges faced by automakers in response to potential tariffs.
In 2014, the U.S. produced over 4 million finished cars, a figure that has since dwindled. Last year, the nation produced just 1.7 million finished vehicles, reflecting a steady decline over the past decade. While U.S. automakers maintain a presence with plants domestically and overseas—such as in Mexico and Canada—shifting production lines is no quick fix. Experts note that moving production can take years, during which time the tariffs could create an economic burden.
“If they become permanent, then there’s a whole bunch of different things that you have to think about, in terms of where do you allocate plants, do you move plants, etc.” – Paul Jacobson
“Those are questions that just don’t have an answer today,” – Paul Jacobson
“As much as the market is pricing in a big impact of tariffs and lost profitability, 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.” – Paul Jacobson
The economic implications of these proposed tariffs extend beyond manufacturing logistics. Last year, the U.S. imported $217 billion worth of passenger vehicles while exporting only $59 billion worth—a decline from 2023 figures. Moreover, nearly half of U.S. car and truck production represents European or Asian brands like Toyota, Honda, BMW, and Mercedes, illustrating the global interdependence within the industry.
“So far what we’re seeing is a lot of cost and a lot of chaos,” – Jim Farley
The potential tariffs threaten to disrupt this delicate balance, possibly leading to increased prices even for vehicles manufactured within the United States due to basic supply and demand dynamics. The U.S. imported $149 billion worth of motor vehicle parts last year, more than twice the value of its exports, indicating how deeply integrated foreign components are within domestic manufacturing.
“Let’s be real honest: Long term, a 25% tariff across the Mexico and Canada borders would blow a hole in the US industry that we’ve never seen,” – Jim Farley
Automakers face a challenging landscape as they navigate these potential tariffs. While they possess excess capacity at U.S. plants and some have previously closed facilities, ramping up production or shifting operations is not an immediate solution. The industry must consider long-term strategies without definitive answers to current uncertainties.
“If the administration moves forward with a 25% tariff on all auto imports, car shoppers should get ready for some sticker shock at dealerships,” – David Greene
