U.S. President Donald Trump recently convened a call with top executives from major American automakers, warning them against raising car prices due to tariffs. Insiders from the meeting revealed that Trump cautioned these executives that the White House would frown upon any price hikes, causing anxiety among some who fear potential repercussions for increasing prices.
Trump suggested that they should instead be grateful for his cancellation of what he described as former President Joe Biden's electric vehicle mandate, which involved subsidies and emission requirements to encourage EV production. During the call, Trump emphasized the benefits of tariffs and claimed that he is better for the manufacturing industry than his predecessor, asserting that tariffs would be "great."
Trump announced a 25% tariff on all imported cars and parts, effective April 2, likely forcing U.S. automakers to raise consumer prices. Most automakers rely on parts and materials from other countries for vehicle production, including those assembled in the U.S.
Since taking office, Trump's relationship with automakers has been volatile, highlighting a challenge to his economic policies. Some experts argue that Trump is attempting to reshape U.S. trade while curbing inflation through tariffs on industries like auto manufacturing. Concerns over living costs, which helped fuel his 2024 election victory, have now become a significant vulnerability.
Detroit automakers, particularly suppliers, have indicated that price increases are inevitable in response to tariffs. One of Trump's tariff strategy goals is to bring more factories back to the U.S., but this may take years for auto companies to achieve.
For now, car dealers have a two to three-month supply of new vehicles, meaning the tariff impact might not be felt until May. A Morgan Stanley analyst report suggests that by then, car prices could rise by 11% to 12% to offset the tariff effects.
