During a call with some of the leaders of prominent automakers in early March, President Donald J. Trump laid down the law regarding their reaction to his incoming tariffs.
In many interviews, speeches, and other public statements, the President has repeatedly said that the word “tariff” is a “beautiful” word that is one of his favorites in the dictionary.
However, they aren’t as pretty to the big drivers and movers that fuel America’s economic engine. A new report indicates that auto industry leaders are under additional pressure to perform due to the implications of Trump’s recently announced tariffs.Â
According to The Wall Street Journal, President Donald J. Trump warned prominent auto CEOs against raising car prices in response to auto tariffs.
Andrew Harnik/Getty Images
Trump to Auto CEOs: Don’t raise prices, or else
According to sources who spoke to The Wall Street Journal, President Donald J. Trump warned prominent auto CEOs that they better not raise car prices in response to auto tariffs.
On a call in early March 2024, Trump cautioned the automotive executives that the White House would oppose such a move if their companies considered it, leaving them very concerned about the possible repercussions.
The sources noted that instead of encouraging the executives, Trump told them that they should be “grateful” for recent policy moves that he sees as positive for the industry. Specifically, he highlighted the recent rollback of what he called “the Biden electric-vehicle mandate,” a set of policies, non-binding goals, and EPA emissions requirements that his predecessor, President Joe Biden, and his administration set forth to encourage further EV adoption.
He also argued that his tariff strategy would benefit automakers in the long run by returning more manufacturing jobs to the US and decreasing their reliance on the complicated web of foreign supply chains.
One source told the Journal that Trump even said that the tariffs would be “great.”Â
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Trump’s grand tariff vision
The Journal’s reporting highlights how potential new, sweeping tariffs will affect the auto industry from the automaker to supplier level.
In the Oval Office on the afternoon of March 26, Trump announced a 25% tariff on all imported vehicles and parts that would begin on April 2. This move is set to force automakers of all stripes to scrutinize their production and supply chain logistics even before it was introduced.Â
Despite this, the man in the seat behind the Resolute desk sees this as nothing but a growth opportunity for automakers, American auto workers, and the American economy. The Trump administration projects that the tariffs could raise $100 billion a year in revenue for the federal government.
“You’re going to see prices going down, but going to go down specifically because they’re going to buy what we’re doing, incentivizing companies to—and even countries—companies to come into America,” he said.
Prominent automakers think otherwise. Early in March 2024, German automaker BMW derided tariffs, adding that free trade is a “guiding principle” that is “of immense importance worldwide.”
“Tariffs, on the other hand, hinder free trade, slow down innovation, and set a negative spiral in motion,” the automaker said. “In the end, they are detrimental to customers, making products more expensive and less innovative.”
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Auto CEOs, Street analysts sound alarm
Auto executives themselves are also far from convinced. At a conference in February 2024, Ford CEO Jim Farley said that implementing 25% tariffs “would blow a hole in the U.S. [car] industry that we’ve never seen.”
Additionally, Street analysts raised bigger red flags for automakers. They recognize that shifting production and adjusting supply chains is not as simple as pressing buttons or flipping a light switch. Building new factories in the U.S. would cost automakers and suppliers billions of dollars and take longer than a presidential administration to set up.
As for now, it would mean terrible conditions for new car buyers.
In a March 27 note, Morgan Stanley analyst Adam Jonas said that 25% tariff on all imports into the U.S. market would effectively inflate the average price of a vehicle by 11 to 12%, and the average monthly payment “from approximately $750/month to $830 or $840/month.”
Additionally, he warned that added costs could cause what was coined as the “Cubanization” of vehicles in the States—an extreme analogy referring to how Cuban motorists have been keeping 1950s American cars alive using scavenged and improvised parts under a decades-long U.S. trade embargo.
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