MW Trump's automobile tariffs reportedly may target finished vehicles, not parts. That's still tough for the industry.
By Victor Reklaitis
Companies may have to decide whether to eat the cost of importing vehicles, pass along the extra expense to buyers or spend money to set up a U.S. factory to assemble vehicles
President Donald Trump and his trade team are thinking about imposing tariffs on finished vehicles coming into the U.S. but not on automotive parts, according to a Wall Street Journal report citing Republican Sen. Bernie Moreno of Ohio and other people familiar with the discussions.
The report comes as Trump is expected to hold a news conference in the Oval Office Wednesday evening to announce tariffs on the car industry.
Even if Trump's new tariffs are not aimed at car parts and instead only target finished vehicles that are imported, they still look likely to cause headaches for the industry. Companies would have to decide whether to eat the cost of importing vehicles, pass along the extra expense to buyers or spend money to set up a U.S. factory to assemble vehicles.
Factory relocations are tough, Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions, said in a recent interview with MarketWatch. Most cars sold in the U.S. that are made in Mexico are cheaper entry-level vehicles, while companies largely manufacture higher-margin SUVs and pickup trucks in the United States.
"Moving production of vehicles takes a lot of investment and a lot of time. It's not something that can be done quickly," Fiorani said.
Frank DuBois, a professor at American University's Kogod School of Business, has made similar points. Carmakers can't suddenly build a plant in the U.S. and find suppliers for that plant, especially if they don't know if tariffs will be in place over the long term, DuBois told MarketWatch last month.
U.S. and European automakers' stocks mostly finished with losses Wednesday as traders braced for the tariff announcement. Shares of General Motors $(GM)$ lost 3%, while Chrysler parent Stellantis $(STLA)$ fell nearly 4%. Ford $(F)$ pared losses to end higher by 0.1%. BMW (XE:BMW), Mercedes-Benz (XE:MBG) and Volkswagen (XE:VOW3) all lost about 2%.
All three major U.S. stock indexes SPX DJIA COMP snapped a three-session winning streak to close lower on Wednesday, with the drop pinned on Trump's plan to announce new tariffs on cars.
-Victor Reklaitis
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March 26, 2025 16:41 ET (20:41 GMT)
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