Automakers are facing difficult decisions and expensive repercussions as a result of tariffs imposed by President Donald Trump. This situation is causing significant challenges to the global auto industry, which heavily relies on parts made in various countries to produce their vehicles.
The tariffs, which were introduced in 2018 as part of Trump’s strategy to boost U.S. manufacturing, have been hitting international automakers hard. They are particularly impacting companies that assemble their vehicles in the U.S. but utilise parts from abroad. The steel and aluminium tariffs, for instance, have on average increased U.S. car prices by $700. This has had the consequence of reducing annual car sales in the country by around 350,000 units, according to a study by the Center for Automotive Research.
Automakers like Volvo, BMW, and Mercedes-Benz, all of whom have significant operations in the U.S., are having to rethink their supply chains and production processes in order to minimize the financial impact of these tariffs. Volvo, for instance, has had to adjust the planned production of their S60 sedan in their new South Carolina factory in response to tariffs. Instead of manufacturing the model for export to China as originally planned, they are producing it for the U.S. market to avoid the tariffs.
Indeed, international automakers are not the only ones feeling the pinch. U.S. based automaker General Motors (GM) reported a $1 billion blow to its profits in 2018 due to the tariffs. In a statement, GM said, “Commodity costs were higher due to increased market prices for some metals, and due to the tariffs imposed by the current administration.”
Jaguar Land Rover (JLR), Britain’s largest carmaker, experienced a £500 million ($656 million) hit, which they directly attributed to the tariffs. Dr. Ralf Speth, CEO of JLR, warned that the tariffs could potentially jeopardize thousands of jobs if the company had to cut costs in response to the elevated charges.
These increases in costs have had a trickledown effect on consumers. The American Automotive Policy Council estimates that the tariffs could lift industry-wide U.S. vehicle prices by $83 billion, hitting consumers directly in their wallets. This scenario paints a picture of a strained auto industry, grappling to cope with the financial responsibilities handed down by Trump’s trade policy.
An end to the tariffs does not seem likely in the near future. Despite ongoing negotiations, there is still no clear road ahead for the automotive industry. Technavio predicts a global automotive market growth of only 3% CAGR during 2019-2023 due to this uncertain climate. Therefore, companies are compelled to recalibrate their strategies and operations, attempting to cushion the hard-hitting consequences of this trade policy.
Last modified: March 28, 2025
