Automotive
The U.S. auto industry is bracing for turbulence after President Donald Trump warned automakers not to hike vehicle prices following his announcement of sweeping new tariffs on imported cars and parts. The directive comes as part of a broader trade move that’s set to send shockwaves across supply chains and showrooms alike.
In a recent high-level call with executives from Detroit’s Big Three and other automakers, Trump made it clear: don’t even think about passing those costs onto consumers. The message, first reported by The Wall Street Journal, left many industry insiders puzzled. The warning arrives just as the industry begins calculating the real-world cost of a 25% tariff on all imported vehicles and parts, set to take effect April 2.
A Price Freeze in a Time of Inflation?
Automakers rely heavily on foreign-made components, even for vehicles built on U.S. soil. That means the new tariffs—intended to boost domestic production—will increase production costs across the board. Trump, however, insisted that automakers keep sticker prices steady, suggesting that tariffs would lower vehicle prices in the long run by forcing companies to build more vehicles and parts in America.
“You’re going to see prices going down,” Trump said, framing the tariffs as a lever to drive foreign manufacturers to invest in U.S. facilities and supply chains.
But behind the scenes, automakers are sounding alarms. From major players like Ford and GM to Tier 1 suppliers like Lear, executives are concerned about the financial squeeze. “Tariffs, at any level, cannot be offset or absorbed,” said Lear CEO Ray Scott in an internal memo. “A holistic, industrywide approach will be necessary to mitigate the impact.”
Tariff Impact Already Taking Shape
According to a Morgan Stanley analysis, the average price of a new vehicle could rise 11% to 12% by early summer, once dealer inventories built up ahead of the tariffs are depleted. That’s a significant jump in a market already plagued by affordability concerns and high interest rates. Already, automakers like Ferrari are raising prices due to the tariffs in hopes that those who can already afford such vehicles will still be ‘committed.’
To avoid a sudden sticker shock, many dealerships have been quietly stockpiling inventory. But analysts say it’s only a matter of time before the full cost of the tariffs makes its way to consumers.
Still, the president remains steadfast. In addition to the tariffs, he’s doubled down on his rollback of what he calls Biden’s “electric-vehicle mandate,” framing his policies as a reset for American auto manufacturing and consumer choice.
Political Pressure Behind the Wheel
Industry insiders suggest the price freeze directive may be more than a request. Trump has shown a willingness in the past to use executive authority and public platforms to put pressure on businesses that defy him. And with federal regulatory agencies overseeing everything from fuel economy standards to factory certifications, automakers may have reason to tread carefully.
Meanwhile, Trump’s campaign has been quick to defend the tariffs as a necessary move to restore American industrial strength. “Restoring Main Street, re-establishing American manufacturing dominance, and putting the American people first are the only interests guiding President Trump’s decisions,” said campaign spokesperson Kush Desai.
But many in the industry are left trying to balance the political message with the economic math. As one unnamed auto executive bluntly put it: “The math would tell you, that is going to cost us multi billions of dollars. So who pays for that?”
Lobbying Kicks into High Gear
As the tariff deadline approaches, automakers are ramping up lobbying efforts in Washington. Stellantis, in a memo to dealers, criticized the policy for potentially helping foreign competitors in Europe and Asia. The company urged dealerships to contact lawmakers and push back against what it called an “unbalanced” policy.
“This is a matter that threatens to disrupt our business,” the email read, highlighting the growing disconnect between political strategy and economic feasibility.
What Comes Next?
Whether automakers will hold the line on prices remains to be seen. With inflation still lingering and supply chains recovering from pandemic-era shocks, the industry is navigating an unpredictable landscape.
Trump’s tariff shake-up could indeed bring more manufacturing back to U.S. soil over time—but in the short term, automakers face a dilemma: absorb billions in additional costs, or risk political blowback by raising prices.
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