Trump tariffs leave car manufacturers with difficult and expensive options

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Automobile manufacturers can respond to the new rates of 25 percent of President Trump in cars and parts imported in several ways. But all of them cost money and will lead to higher car prices, analysts say.

Manufacturers can try to move the production of countries such as Mexico to the United States. They can try to increase the amount of cars that are already here. They can stop selling imported models, especially those that are less profitable.

But whatever car manufacturers decide, car buyers can expect to pay more for new and used vehicles. Estimates vary widely and depend on the model, but the increase could vary from around $ 3,000 for a car made in the United States to more than $ 10,000 for imported models.

These figures do not take into account additional tariffs that Mr. Trump said he would announce next week to punish countries that impose tariffs on US assets. He has also said that he would further increase tariffs if commercial partners such as Canada and the European Union raise tariffs in response to their automatic tariffs, which leads to a growing TIT commercial war per eye.

“It will be disruptive and expensive for US consumers for several years,” said Michael Cusumano, MITAn Sloan School of Management administration professor.

Trump has shown rates for a long time. But many automobile executives expected their threats to be a negotiation tool. Trump launched those hopes on Wednesday when he said in the White House that the rates were “100 percent” permanent.

Mr. Trump framed rates as a way to bring the manufacture of cars back to the United States. The United automobile workers union agreed, saying that car manufacturers could reopen plants in places like Lordstown, Ohio, or expand production in cities such as Warren, Michigan, where car workers have been fired.

“Now it is in car manufacturers, from the great three to Volkswagen and beyond, to bring good work from the union to the United States,” said Shawn Fain, president of the UAW, in a statement on Wednesday, referring to General Motors, Ford Motor and Stellantis, owner of Chrysler, Jeep and Ram.

But relocating the factories is expensive and slow. Automobile manufacturers generally need at least two years to establish a new assembly line and make sure the vehicles produced by complying with quality standards. To completely avoid rates, they would also need to relocate diabolically complicated supply chains that often involve suppliers in dozens of countries.

Tariffs could encourage companies to choose locations in the United States instead of Mexico or Canada when they contemplate where to expand production or build a new model. But choose a site due to tariffs, and not because it is the most efficient place to manufacture, it would reach a cost for consumers.

Some companies may doubt in making those decisions, which can cost hundreds of millions of dollars, because they are worried that Mr. Trump, despite the guarantees, otherwise can change his mind. Or the next president could reverse his tariffs.

“What we hear from many clients is: 'How do we justify that capital expenditure without knowing if this is a long -term process?' “You make that investment and in two years they say: 'It doesn't matter.'”

Automobile manufacturers, several of whom declined to comment, will probably avoid transmitting the entire cost of tariffs to consumers. If prices increase too much, sales could fall, which leads to a spiral of death of sinking income and increased costs. Economists concern that financial interruption caused by tariffs can help cause a recession.

Some car manufacturers have been storing parts and finished cars before tariffs are activated, but that will keep prices only for a while.

“Tariffs will only make people pay more for cars, and people will buy less cars,” said WC Benton, a professor of operations and supply chain management at Ohio State University.

New cars are already out of the reach of many Americans: the average sale price these days is more than $ 48,000, according to Cox Automotive. It is also expected that used cars prices will increase, as they did during the pandemic, since more buyers look for affordable options.

Most car manufacturers are not extremely profitable and have a limited financial space to maneuver. General Motors, which is among the most profitable companies, had a net profit in sales last year of 3.2 percent. As a result, car manufacturers will have to pass much of the cost of tariffs to their customers.

If so, tariffs could add $ 15,000 to the price of a 1500 RAM truck, almost $ 12,000 to a Toyota Tacoma truck, $ 9,000 to a Forest Subaru SUV and $ 6,000 to a Nissan Sentra sedan, according to Iseecars estimates, a site for buying online car.

Some car manufacturers are already increasing prices. Ferrari, whose sports cars manufactured in Italian are sold for hundreds of thousands of dollars, said Thursday that it would increase prices up to 10 percent in some models in response to tariffs.

Automobile manufacturers can stop selling some less profitable models, which tend to be smaller and more affordable. They will promote cars and trucks made in the country, many of which are larger and more expensive. All main car manufacturers, including foreign brands such as Mercedes-Benz, BMW, Volkswagen, Honda and Toyota, have large factories in the United States.

But no car will be exempt from rates because they all have foreign manufacturing pieces, which generally represent at least one third of the vehicle's value. That portion will be subject to a rate of 25 percent, according to the Trump administration.

“There is no American car,” said Simon Geale, Executive Vice President of Proxima, a consulting firm that advises companies about acquisitions.

Some car manufacturers can avoid making great changes in their operations in response to tariffs, betting that the consequences will be so serious that the Trump administration will have to go back.

“There will be an incredible reaction of American consumers,” said MIT Cusumano, “I hope there is an answer to that.”

Ana Swanson Contributed reports.