The Trump administration is implementing 25 percent tariffs on foreign automobiles imported to America. Most analysts predict the major effect of these tariffs will be substantially higher prices for new cars. Reports suggested President Trump “warned” automakers not to raise prices. However, in a subsequent interview with NBC News, Trump refuted the claim, asserting that he “couldn’t care less” whether automakers raised prices.
Key Takeaways
- Donald Trump reiterated multiple times he “couldn’t care less” whether car prices go up
- Trump refuted a report he warned automakers against raising prices
- Extending the tariffs to individual parts could prove tricky
- Automakers want tariffs limited to major parts to save costs
- Tariffs will likely be applied across the board rather than to individual vehicles
Trump “Couldn’t Care Less” Whether Cars Get More Expensive
Trump “couldn’t care less” about the prospect of increased car prices. He repeated that line multiple times during the NBC News interview.
“No, I never said that. I couldn’t care less if they raise prices, because people are going to start buying American-made cars.”
“I couldn’t care less. I hope they raise their prices, because if they do, people are gonna buy American-made cars. We have plenty.”
“No, I couldn’t care less, because if the prices on foreign cars go up, they’re going to buy American cars.”
A Trump administration aide later clarified to NBC News that he was speaking specifically about foreign cars. Trump did leave open the prospect of negotiations to eliminate the tariffs, but only if other countries are willing to offer “something of great value.”
Trump’s Tariff Implementation Could Take Some Time
A straight 25 percent tariff on vehicles not assembled in the United States would be straightforward. However, Trump’s tariffs could prove vastly more complicated. The executive order allows Canadian and Mexican cars to only receive a 25 percent tariff on non-American parts. That would help a vehicle like the Toyota Tacoma, which is assembled in Mexico but has its engine assembled in the United States.
Even more complex would be the proposed 25 percent tariff on automotive parts. According to Automotive News, that addendum was added “as the document was being drafted” on March 26. That provision would affect vehicles built in the United States. Automakers believe it could add billions in additional costs and are reportedly trying to limit it to major parts and not minor components like wiring sheaths.
TopSpeed’s Take
The tariff situation is fluid. There’s a lot of uncertainty about what will happen. Automakers may wait to see how the regulations play out (and to avoid being the first mainstream brand to jump in with inflated prices). However, it’s important to address Trump’s assertion that the tariff will apply to individual vehicles, and thus, “foreign” vehicles will be more expensive while American-made cars will be cheaper. This may not be how buyers experience the tariffs.
The tariffs will create fixed costs for the automaker. The automaker will decide whether or (more likely) how to recover that cost from consumers. For example, Ford assembles the Bronco Sport crossover and Maverick pickup at its Hermosillo plant in Mexico. Ford will pay a tariff to import them. But Ford may not recover the cost of those vehicles with, say, a Ford Maverick Lariat that now starts at $43,700. Ford will likely spread the tariff cost across its entire lineup, through increased destination and handling charges and smaller price hikes on large-volume American-built vehicles like the F-150, the Bronco and the Explorer.
Essentially, Ford keeping the Maverick and Bronco Sport (which buyers definitely want) in the lineup makes its cars more expensive. Eliminating the Maverick and Bronco Sport would eliminate affordable Ford options, thus making Fords more expensive. A tariff on imported parts would make even American-built cars more expensive. And the ideal tariff-proof, 100 percent American-made vehicle would be more costly due to the labor costs involved.
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