Many industries were able to breathe a sigh of relief after the U.S. Court of International Trade ruled 3-0 that President Donald Trump’s Liberation Day tariffs exceeded the authorities granted him under the Constitution.
But the automotive industry wasn’t one of them.
The automotive industry is one of the few whose 25% duties remain unchanged by Wednesday’s ruling.
Related: Ford CEO Jim Farley has a strong take on tariffs
This is because the court ruled that the universal reciprocal tariffs he implemented exceeded what he could do under the emergency powers he invoked on April 2 to justify them.
However, Section 232 of the Trade Expansion Act of 1962 gives the president the authority to tax the imports of products deemed to threaten or impair the national security of the U.S.
While this authority is granted only after the Commerce Department investigates that specific industry, the Commerce Department, like all executive branch departments, answers to the White House.
Moreover, the two lawsuits prompting Wednesday’s ruling, one filed by five small businesses and the other by 12 different states, only challenged the president’s authority under the International Emergency Economic Powers Act of 1977, not Section 232.
So tariffs issued under that provision, like auto tariffs, are not affected by the ruling. Also, late Thursday, an appeals court stayed the ITC court’s ruling, so tariffs are definitely here to stay for now.
In light of this fact, at least one foreign car company may be reaching its breaking point.
Hyundai car lots are about to get more expensive.
Image source: Bloomberg/Getty Images
Hyundai considers U.S. price increase to offset tariffs
Korean automaker Hyundai could soon announce across-the-board price increases to combat the 25% duties being placed on auto imports.
Hyundai is considering a 1% price increase to the suggested retail price of every model in its lineup starting as soon as next week, Bloomberg reported, citing sources familiar with the company’s thinking.
To avoid raising prices even more, the company will also likely raise shipping charges for supplies like floor mats and roof rails that are installed before the vehicles arrive at dealerships.
Related: Another Japanese automaker takes drastic action on tariffs
While the company officially said the move has nothing to do with tariffs, Bloomberg’s sources said otherwise.
Trump has been hard on companies that defy him and raise prices in response to tariffs. He has openly criticized Walmart recently, telling the company to “eat the tariffs“ instead of passing the cost along to customers.
He notified the company that he would “be watching“ to make sure they didn’t raise prices.
Other auto companies, such as Ford and Toyota, have recently used language similar to Hyundai’s to justify raising prices, saying that the move is consistent with their normal seasonal price adjustments.
Hyundai is the third-largest auto importer in the U.S., importing 1.1 million cars from overseas last year. Toyota and, oddly enough, America’s own General Motors, were the top auto importers last year, importing 1.2 million vehicles each.
Car manufacturers have mixed responses to tariffs
The auto industry is in a tough spot.
Domestic producers have publicly cheered the tariffs, since they give them a leg up against the competition, which doesn’t have the same production footprint in the U.S.
But behind the scenes, they also face a ton of pressure on their bottom lines.
Ford, GM, Stellantis, and others have all already pulled their guidance for the year due to a lack of visibility.
Ford says tariffs will wipe $1.5 billion from its EBITDA. General Motors says tariffs could cost it $5 billion in EBITDA.
Stellantis imported 564,000 vehicles last year, well ahead of Ford’s 420,000 imports. Both imported fewer than half of the vehicles GM did last year.
“Last year, we assembled over 300,000 more vehicles in the U.S. than our closest competitor. That includes 100% of all our full-size trucks,” Ford CEO Jim Farley said during the company’s last earnings call.
“In this new environment…automakers with the largest U.S. footprint will have a big advantage, and boy, is that true for Ford,” he added. “It puts us in the pole position.”
Related: Toyota moves production of popular US sedan to Britain
