U.S. President Donald Trump says he wants to reinvigorate the American auto industry, spurring a flurry of new assembly plants and jobs by erecting a tariff wall around the country.
But the U.S. industry is pushing back against his scheme, warning Mr. Trump’s plan to levy import taxes on auto parts by May 3 will drive up prices for buyers, destroy supply chains and cause layoffs.
Representatives of the industry – including the Detroit Three automakers, parts suppliers and dealerships across the country – have urged the Trump administration in a letter to reverse course. The letter, dated April 21, marks a rare showing of united resistance to Mr. Trump’s policies in one of the U.S.’s largest manufacturing sectors.
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“Tariffs on auto parts will scramble the global automotive supply chain and set off a domino effect that will lead to higher auto prices for consumers, lower sales at dealerships and will make servicing and repairing vehicles both more expensive and less predictable,” reads the letter, signed by heads of the American Automotive Policy Council (AAPC), National Automobile Dealers Association and four other associations. AAPC lobbies for the U.S. manufacturers Ford Motor Co., General Motors Co. and Stellantis, but not Tesla Inc.
The letter echoed fears expressed by the Canadian auto parts executives that tariffs will quickly bring auto assembly to a halt. The auto industry is a low-profit margin business – typically less than 10 per cent – that cannot afford double-digit tariffs. Should parts suppliers be forced to bear the cost of the tariffs, many will cease manufacturing rather than lose money.
“Most auto suppliers are not capitalized for an abrupt tariff-induced disruption,” the groups said in the letter. “Many are already in distress and will face production stoppages, layoffs and bankruptcy. It only takes the failure of one supplier to lead to a shutdown of an automaker’s production line. When this happens, as it did during the pandemic, all suppliers are impacted, and workers will lose their jobs.”
The groups did not respond to interview requests.
Until now, leaders in U.S. auto manufacturing have been mostly quiet in the face of the tariffs, which have been laid on imported automobiles since April 3.
James Farley, Ford Motor’s chief executive officer, warned in February the tariffs will “blow a hole” in the industry. But the heads of Stellantis and GM have not publicly expressed opinions on the tariffs, until the release of the April 21 letter.
Patrick Anderson, principal of Anderson Economic Group, an automotive consultancy in East Lansing, Mich., said the massive costs of the parts tariffs have spurred the industry to drop its reluctance to speak publicly and come out against Mr. Trump’s policies.
“The sheer cost of the tariff are so daunting that you can’t expect them to not speak more directly in the coming days,” Mr. Anderson said by phone. “This letter from a half dozen auto industry groups is a clear indication that they realize they have to speak directly and to some degree more bluntly than they have in the past.”
Flavio Volpe, head of the Automotive Parts Manufacturers’ Association, which represents 230 Canadian suppliers, said the letter, released publicly, signals great U.S. concern Mr. Trump will not change his mind as May 3 approaches. By going public, the U.S. auto industry is signalling it fears its behind-the-scenes lobbying might not be successful, he said.
“The era of negotiation or persuasion appears to have failed. Otherwise, why write the letter?” Mr. Volpe said.
The U.S. companies – Ford, GM and Stellantis – have been paying the 25-per-cent tariffs on non-U.S. content of the vehicles they assemble in Canada and Mexico. As the importers, the same manufacturers will be stuck with the tariff bill when the levies are applied to separate auto parts. It is not clear if some will ask suppliers to bear some of the costs. The integrated North American auto industry relies on parts suppliers and assembly plants in Canada, the U.S. and Mexico.
Auto industry executives have not expressed any widespread intent to move factories to the U.S., citing the billions of dollars in costs and years to rebuild supply lines. Stellantis, however, recently paused production in Windsor, Ont., and GM has said it could shift production to the U.S.
The total cost to U.S. consumers in the first year of tariffs on cars and parts will be US$30-billion, according to research published by Anderson Economic Group.
Auto tariffs will drive up U.S.-made car prices in the United States by US$2,500 to US$12,000, depending on domestic content, the think tank estimates. At the low end are cars with high U.S. content, including the Honda Civic and Volkswagen Jetta. Trucks such as Ram, Toyota and Ford Bronco Sport will cost as much as US$8,500 more on dealer lots.
Imported European luxury cars made by Audi, BMW and Land Rover could go up in price by more than US$20,000.
The cost increases will be seen starting in May, depending on inventories.
The tariffs, Mr. Anderson said, “are going have a very significant effect on the affordability of automobiles, including automobiles that people think of as American cars that are assembled in America with American parts along with Canadian and Mexican parts who are assembled in Canada with American parts.”
“The entire industry has indicated to the President that this is going to cost consumers thousands of dollars per car and it’s going to result in fewer car sales as well as loss of jobs,” he said.
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