As Auto Tariffs Take Effect, Automakers Shift Gears

Share prices of U.S. and foreign automakers slump a day after Trump’s tariff announcement.

Cars for export before being loaded onto a ship at a port in Yantai, in eastern China's Shandong province on April 3, 2025. AFP via Getty Images

President Donald Trump’s 25 percent tariffs on automobiles not made in the United States have taken effect.

At the much-anticipated April 2 “Make America Wealthy Again” event, Trump confirmed that levies on imported vehicles would go into effect at midnight. The White House will also implement higher import duties on car parts such as engines and transmissions on May 3.

Share prices of U.S. and foreign automakers slumped during the April 3 trading session.

The Ford (F) share price tumbled by 4 percent, while that of General Motors (GM) sank by nearly 3 percent. Tesla Motors (TSLA) and Stellantis (STLA) share prices also declined by about 6 percent.

Overseas car manufacturers tumbled, too, as investors digested U.S. tariff plans. Volvo (VLVLY) plunged by 12 percent, Volkswagen (VWAGY) shed 4 percent, and Honda (HMC) slipped by 2 percent.

Used-car retailers Carvana (CVNA) and CarMax (KMX) also fell by 20 percent and 7 percent, respectively.

Canadian officials, including Ontario Premier Doug Ford, said they were relieved to discover that the country was subjected to the president’s baseline 10 percent tariffs and not added to the lengthy “worst offenders” reciprocal tariffs list.

“The positive thing that I saw was we weren’t on that list,” Ford told reporters. “We weren’t on page one, we weren’t on page two, we weren’t on page three, ourselves and Mexico. We’re going to stay tuned.”

However, according to Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, this is akin to “dodging a bullet into the path of a tank.”

“Canadians sighing with relief for not being on this list should remember we still have border tariffs of 25 percent, auto tariffs of 25 percent and steel and aluminum tariffs of 25 percent,” Volpe said on social media platform X.

Research from Oxford Economics shows that disruptions spurred by tariffs will adversely affect the Canadian province of Ontario and Mexican border states, which export a significant share of total automotive sales to the United States.

Overall, while tariffs will likely ignite reshoring efforts, they “will also raise the cost to U.S. manufacturers and households,” according to a report by Oxford Economics.

“Our analysis suggests that the tariff applies to nearly one third of the price of the car,” the group stated.

‘Mutually Beneficial Scenario’

Automakers have started assessing the tariff situation.

Stellantis announced on April 3 that it would pause production at two assembly plants in Canada and Mexico, affecting thousands of workers. In addition, as a result of this stoppage, there will be temporary layoffs at plants in Indiana and Michigan.

“With the new automotive sector tariffs now in effect, it will take our collective resilience and discipline to push through this challenging time,” Stellantis North American Chief Operating Officer Antonio Filosa said in an email to employees that was shared with The Epoch Times.

Workers install a windshield in a Ram 1500 truck on the assembly line at the Warren Truck Assembly Plant in Warren, Mich., on Sept. 25, 2014. The plant was operated by Chrysler, which is now part of Stellantis. Bill Pugliano/Getty Images

“These are actions that we do not take lightly, but they are necessary given the current market dynamics.”

Ford, meanwhile, announced on April 3 that it will offer employee pricing to all U.S. shoppers. The company cited “uncertain times” and the “complexities of a changing economy” as reasons for the promotional offer.

“For 121 years, we’ve put our money where our mouth is, assembling vehicles that Americans rely on and supporting American jobs,” Ford said in a statement. “Today, we’re proud to announce a new U.S. initiative that’s more than just a promotion. It’s a handshake deal with every American.”

Ascencioné, an automotive technology manufacturer, has seen greater interest from companies pursuing domestic manufacturing solutions amid the potential effects of the administration’s auto tariffs.

Ed Cox, the company’s senior design engineer, noted that private investments in U.S. manufacturing will likely create more industry opportunities as “more companies shift from offshore to domestic production.”

“This transition represents a mutually beneficial scenario, fostering growth for U.S. manufacturing while creating new opportunities for small businesses like ours,” he told The Epoch Times.

Driving Through Economic Details

During his Rose Garden announcement, the president touted steelmakers, factory workers, and car manufacturers. But while he has championed the working class, Nancy Tengler, chief investment officer at Laffer Tengler Investments, said she thinks that it will be a balancing act.

“The common man works for auto manufacturers, and if the auto tariffs stick, demand will decline, and you can finish that thought,” Tengler said in a note emailed to The Epoch Times.

Deutsche Bank economists have expressed similar concerns about diminishing demand for motor vehicles. While the bank projected modest growth in vehicle demand this year, conditions could evolve as tariffs traverse the marketplace.

“However, while demand could spike near term for cars already on lots that are not subject to tariffs, higher prices will eventually weigh on demand,” Justin Weidner, economist at Deutsche Bank, said in a note.

The bank’s economists forecast that if auto tariffs remain intact for the rest of 2025—Trump has said that they will be permanent—they could trim as much as 30 basis points from real gross domestic product growth.

Cox Automotive analysts said auto tariffs could increase prices by an average of $5,300. This would affect demand for new vehicles, as customers would be priced out of the market.

“Several years of this tariff impact will cause more consumers to trade down from new to used,” Jeremy Robb, senior director of economic and industry insights at Cox Automotive, said in a note. “If tariffs cause the average price of a new unit to rise above $50,000 (which is likely given prices today), then even more consumers cannot or will not pay up for a new vehicle.”

In a recent interview with NBC News, Trump said he was indifferent to foreign automakers’ potentially raising their prices because consumers will start purchasing U.S.-made vehicles.

“No, I couldn’t care less because if the prices on foreign cars go up, they’re going to buy American cars,” the president said.