Auto Industry, Consumers Brace for Global Tariff Fallout

Yahoo

04-04-2025

Automaker trade groups call for high-level negotiations between political leaders as tariffs upend markets and usher in a new era of uncertainty.
US automakers have publicly remained silent on issue of 25% auto tariffs and the new "reciprocal" tariffs, though the first effects from this week's announcement are already being felt at home.
Auto dealers in the US faced an uptick of shoppers seeking to buy existing vehicles before the tariffs kick in, though the longer-term effects of the tariffs remained uncertain for dealer inventories in the coming months.
As the European Union and other major US trade partners raced to respond to the Trump administration's "reciprocal" tariffs, formally announced on April 2, foreign automakers and other heavy industries faced a starkly different world than on Monday of this week.
But the first effects on jobs materialized on this side of the Atlantic.
Stellantis plans to lay off some 900 workers, at least temporarily, in the wake of the announcements of the new tariffs, and will also halt production at two plants in Canada and Mexico, one of which produces the new Dodge Charger Daytona EV. An additional 4,500 workers in Canada are expected to be laid of as well, as soon as Monday, April 7.
The new tariffs drew sharp reactions from some domestic trade groups representing auto manufacturers and suppliers, even though the newly announced "reciprocal" levies wouldn't be added to the 25% vehicle import duties revealed earlier.
"The stakes for manufacturers could not be higher. Many manufacturers in the United States already operate with thin margins," said National Association of Manufacturers President and CEO Jay Timmons in response to the tariffs announced on April 2.
"The high costs of new tariffs threaten investment, jobs, supply chains and, in turn, America's ability to outcompete other nations and lead as the preeminent manufacturing superpower."
US automakers themselves, however, largely stayed silent on the issue of the new "reciprocal" tariffs, avoiding direct statements regarding the measures, and for the most part only issuing internal communications to dealers in regards to inventory.
The UAW issued a formal statement last week sounding a positive note in regards to the 25% tariffs on vehicles announced earlier in March, but has not addressed the new "reciprocal" tariffs.
"We applaud the Trump administration for stepping up to end the free trade disaster that has devastated working class communities for decades," UAW President Shawn Fain said in a statement on March 26. "Ending the race to the bottom in the auto industry starts with fixing our broken trade deals, and the Trump administration has made history with today's actions.
"With these tariffs, thousands of good-paying blue collar auto jobs could be brought back to working-class communities across the United States within a matter of months, simply by adding additional shifts or lines in a number of underutilized auto plants," a statement from UAW added.
The new "reciprocal" tariffs announced this week also drew swift reactions from trade groups representing European automakers, some of which have no US manufacturing presence to soften the impact of the new levies.
"The announced imposition of a 10% tariff on all UK products exported to the US, whilst less than other major economies, is another deeply disappointing and potentially damaging measure," said Mike Hawes, chief executive of the UK-based Society of Motor Manufacturers & Traders.
"Our cars were already set to attract a punitive 25% tariff overnight and other automotive products are now set to be impacted immediately. These tariff costs cannot be absorbed by manufacturers, thus hitting US consumers who may face additional costs and a reduced choice of iconic British brands, whilst UK producers may have to review output in the face of constrained demand."
British brands, traditionally representing smaller-volume luxury automakers, are expected to be particularly affected by the 25% auto tariffs, with Land Rover, Mini, Jaguar, and others having maintained a manufacturing footprint primarily in the UK, even while their corporate parents reside elsewhere.
Not only will vehicles produced in Europe and elsewhere be affected by the administration's latest actions, but the tariffs are also expected to have an effect on vehicles produced in the US for export.
And in this case, both US and foreign automakers will be feel the fallout, trade groups warned.
Some notable examples of the former include Mercedes-Benz and BMW plants in the southern states that produce SUVs for North America and for export elsewhere in the world—a significant category by transparent volume.
The auto tariffs, which will also cover imports of spare parts produced by suppliers, sparked calls for negotiations by individual countries and automakers, though a concrete strategy for bargaining with the US administration that might immediately bear fruit remained hard to find.
A single strategy for addressing the tariffs is unlikely to emerge, as different automakers now face very different challenges, but US automakers face their most immediate hurdles with Canadian and Mexican plants and suppliers.
When it comes to auto parts, the tariffs on imported components are set to go into effect on May 5.
"European automakers are committed to being active in the US, making an important contribution to the US economy, accounting for around half a million jobs across the auto sector, exporting over 750,000 vehicles to the US in 2024, and actively investing in local communities to foster economic prosperity," said Sigrid de Vries, Director General of the European Automobile Manufacturers' Association.
"We urge our leaders to meet urgently so that they can find a solution to any issues preventing free and fair trade between historic allies and allow the EU-US relationship to flourish once again."
US automakers' main exposure to tariffs will be reflected not only in the cost of parts, but also through assembly of domestic-branded vehicles in Canada and Mexico, with the latter having seen a factory building boom over the past decade that attracted US and European brands alike.
Uncertainty over implementation of the tariffs could cause cargo back-ups on the borders with Canada and Mexico, it is feared, and also in US ports as automakers adjust shipping schedules.
The good news for Canada and Mexico trade, if any, is that it is exempt from the baseline 10% tariff.
The more granular effects of the tariffs have yet to be felt by auto dealers and consumers, as dealers are currently sitting on a supply of vehicles that were delivered weeks or months earlier.
So price hikes, even though they are on the way, won't hit dealerships right away.
Auto dealers have already begun to feel an uptick in the numbers of vehicle shoppers eager to buy cars and trucks ahead of the tariffs—a trend that may persist while pre-tariff inventory lasts—with used cars also predicted to see a bump in retail prices as a result.
The spring and summer car shopping season, therefore, could see two separate populations of pre-tariff and post-tariff new vehicles, as well as stronger demand for off-lease used cars.
Are the tariffs, if they persist for months, likely to affect your vehicle purchase plans or their timing this year? Let us know in the comments below.