Uncertainty seems to be the mood of the season as investors attempt to navigate the nearly universal tariffs President Donald Trump and his administration placed on the rest of the world.
One of Trump’s goals for this move, besides balancing trade deficits with other countries, is to move the U.S. government back to a time when most of its revenue came from tariffs rather than income taxes.
💵💰Don’t miss the move: Subscribe to TheStreet’s free daily newsletter 💰💵
While many economists point out that Trump’s version of history has some plot holes and that previous tariff hikes have contributed to global economic meltdowns in the past, the current administration is willing to feel the pain in the short term to get its agenda through.
In Trump’s vision, fair trade with our global partners, higher wages for workers at home, and prosperity for all lie at the other end of the tunnel.
Related: General Motors delivers surprising business update
However, we are not at the other end of the tunnel. In fact, April 3 officially marked the country’s descent into a deep, dark economic period with no end in sight.
One of the industries with the most complicated path forward is the auto industry, which saw 25% duties slapped on all imports.
Tariffs will have a unique impact on autos
Low trade barriers and low-quality products stateside during the 70’s helped the Japanese auto industry come to dominate what was once the pride and joy of American manufacturing: autos.
To combat this incursion, the U.S. auto industry turned to industrial collaboration with our neighbors to the North and South, shifting production overseas where labor and production are cheaper.
In the 90’s, President Bill Clinton signed the North American Free Trade Agreement, essentially knocking down barriers to trade with Canada and Mexico. This move greatly reduced the number of vehicles made stateside for the auto industry.
While the number of cars produced by the Big 3 U.S. automakers has steadily increased over the decades, the percentage of vehicles made in the U.S. has steadily fallen.
U.S. domestic auto production has tanked since the mid-90’s.
In January 1994, manufacturers produced more than 575,000 vehicles in the States; by January 2025, fewer than 100,000 vehicles were produced in the U.S., according to the U.S. Bureau of Economic Analysis.
Today, about 53% of cars sold in the U.S. are made in the U.S.
However, while Donald Trump has said that companies that make their products domestically won’t have to worry about tariffs, this statement isn’t entirely true for the auto industry.
Major components for vehicles assembled stateside are imported from Canada, Mexico, and Korea. While the President has allowed carveouts for components that fall under the USMCSA (Trump’s version of NAFTA), auto parts are complicated.
For example, the transmission gears may be compliant, but the clutches and torque converter may not. It is unclear which taxes are applied in this scenario.
“We stress that the concept of a U.S. car maker with parts all from the U.S. is a fictional tale that does not exist and would take years to make this concept a reality,” Wedbush analyst Dan Ives said in a recent note.
What can consumers expect from auto tariffs?
The bottom line is that consumers can expect to pay more for their vehicles, even if they buy American.
Prices for new foreign cars could increase by as much as $6,000 per vehicle for models under $40,000, according to AutoTrader, a nearly 15% increase.
Related: Ford reports surprising news amid Tesla turmoil
On Wednesday, the administration clarified that imported vehicles subject to the new tariff would be exempt from reciprocal tariffs and that Canada and Mexico would face a lower duty than other exporters like South Korea, Japan, and the European Union.
If Trump’s approach to the auto industry seems a bit more nuanced than his approach to others, it may be because the U.S. Auto industry—specifically General Motors, Ford, and Stellantis—has been lobbying the administration for weeks to hear their side of things.
Ford, GM, Toyota, Honda and Stellantis produce the most vehicles in the U.S., according to S&P Global Mobility, with the five accounting for 67% of light vehicle production in the country last year.
Meanwhile, Bernstein estimates 57% of the value content in U.S. assembled vehicles is imported, leaving them and consumers, vulnerable to higher prices.
Consumer costs are also expected to rise for vehicle maintenance as “dealership and body shops source imported parts that are exactly like or similar to the ones originally used to make your vehicle,” AutoTrader said.
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
