Estimating the Impact of Trump's Auto Tariffs: Which Automakers Will Be Hit Hardest and How Much Will Car Prices Rise?

TradingKey – Recently, U.S. President Donald Trump announced that a 25% tariff on all non-U.S.-manufactured cars will take effect starting April 2. In response, the European Union and Canada have threatened retaliatory measures. Industry experts and Wall Street analysts predict that the resulting auto tariff war will undermine the profitability of many automakers and drive up car prices for consumers.

Domestic Production Levels of U.S. Automakers

Since Trump’s auto tariffs target vehicles not produced in the U.S., analysts believe that automakers with high levels of domestic production will be relatively insulated, while those heavily reliant on international supply chains will be hit the hardest.

According to Yahoo Finance, mainstream car brands with more than 50% of their production based in the U.S. include Tesla (100%), Rivian (100%), Ford (78%), as well as Honda, Stellantis, Subaru, Nissan, and General Motors.

Bernstein analysts noted that, by sourcing nearly all of its components domestically, Tesla may not only avoid significant downside but could also profit as competitors are forced to raise prices. UBS echoed this view, suggesting that Tesla and Rivian may perform better under the new tariff regime, despite the fact that not all their components are sourced locally.

In contrast, automakers with lower levels of U.S. domestic production include Volvo (13%), Mazda (19%), Volkswagen (21%), Hyundai-Kia, Mercedes-Benz, Toyota, and BMW.

AutoForecast Solutions analysts pointed out that while European luxury carmakers and their buyers might absorb some price increases, companies like Toyota, Mazda, and Subaru, which heavily rely on imports, will face significant challenges. It is estimated that profits for General Motors, Stellantis, and Ford could drop by billions of dollars in the coming quarters.

JPMorgan noted that while Ferrari buyers may be less sensitive to price hikes, they could delay purchases, negatively impacting Ferrari’s earnings, as 40% of its global sales come from the U.S market.

Bloomberg Research highlighted that Trump’s tariffs could wipe out 25% of operating profits for Porsche and Mercedes-Benz in 2026, forcing them to either raise prices or shift more production to the U.S.

Additionally, even companies with high levels of U.S. domestic production are not entirely immune to the impact of tariffs, as they may still face rising costs for imported parts. Tesla CEO Elon Musk has acknowledged this concern.

Moreover, as the cost of imported parts rises, automakers’ attempts to find domestic alternatives could increase demand and drive up prices for U.S.-made components.

Rising Car Prices

The U.S. government reported that in 2024, American consumers purchased 16 million sedans, SUVs, and light trucks, half of which were imported.

Just hours after President Trump announced the new auto tariffs, Ferrari stated it would raise prices on certain models by 10% to offset losses caused by the tariffs.

TD Economics analysts predicted that if automakers pass on all additional costs to consumers, the tariffs could increase the average price of sedans and light trucks in the U.S. — which totaled more than $47,000 last month — by up to $5,000 if automakers pass along the entire cost to consumers. That price hike could go higher – to as much as $10,000 – if the Trump administration applies the tax full to cars made in Mexico and Canada.

Several Wall Street firms have since released estimates on the impact of Trump’s 25% auto tariff, including its potential effects on vehicle prices and others:

• Goldman Sachs: Increased production costs by 8,000; car prices could rise between $5,000 and $15,000.
• Guggenheim: Increased car costs by $6,000 to $7,000; consumers would pay even higher prices.
• Bernstein: $6,700 per vehicle.
• Bank of America: At least $4,500.

Experts also noted that rising new car prices could push many buyers into the used car market, potentially driving up prices for second-hand vehicles as well.

What’s Next?

With less than a week remaining until Trump’s April 2 tariff deadline, industry experts emphasize that the exact impact on car prices will depend on several factors: the origin of the vehicles, the proportion of imported parts, and how long it takes the government to determine which components will be subject to tariffs.