- Liberation Day on April 2 promises to bring with it more tariffs from the Trump regime.
- The auto industry may be sparred from the next round of tariffs but remains in the crosshairs.
- Tariffs on cars and components could push up new car prices.
Tariffs continue to be the order of the day for President Trump and his administration, with April 2nd the next big moment. Titled “Liberation Day,” Trump reportedly plans to announce new reciprocal tariffs as retribution. Its impact on the auto industry continues to play a role in the minds of executives, but according to sources close to the effort, the new tariff plan will be more focused.
Read: Tesla Sends A Cry For Help To The Trump Admin Over Tariffs
Trump has long mooted tariffs for the foreign auto industry, but the initially proposed tariffs against Mexico and Canada were paused for a second time at the beginning of March.
Impact on the Auto Industry
The US President had initially stated that auto tariffs would come in the same April 2nd Batch, but according to Bloomberg, it’s as yet unclear if cars will come under the same “Liberation Day” batch.
However, even if the auto industry is spared from the latest announcement, that doesn’t mean execs are out of the water. With Trump openly criticizing countries like Japan, South Korea, Germany, and Mexico for their trade practices, carmakers in those markets are clearly in the crosshairs.
For the global auto industry, which relies heavily on cross-border supply chains, even the whiff of protectionism poses a significant challenge. Cars assembled in the States often contain parts sourced from a dozen different countries. Tariffs on those components could drive up production costs, inflate prices, and slow consumer demand. For American automakers with international manufacturing facilities, this could become a logistical and financial nightmare.
Tariffs as Revenue?
In contrast, Trump has proposed that the introduction of tariffs is more than just about economic leverage — with the US President predicting that they could become a revenue stream. The idea that tariffs could raise trillions of dollars for the US economy has been suggested by his team, and would offset proposed tax cuts.
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But while that might sound appealing from an economic standpoint, there’s one problem: consumers end up paying for it. When the U.S. slaps tariffs on imported goods, those costs typically get passed on to consumers through higher prices. So, while the government collects the revenue, it’s the consumer who feels the financial pinch.
In any case, it would seem that local automotive manufacturers don’t exactly share Trump’s optimistic view. Ford CEO Jim Farley has stated that the threat of tariffs had the potential to caused chaos, but ultimately believed that Trump aimed to strengthen the US auto industry. Then, on March 5, Trump announced that after discussions with the Big Three automakers, that his administration would postponing the introduction of Mexican and Canadian tariffs.