After a one-month delay, President Donald Trump has enacted the United States’ most aggressive tariffs in nearly 100 years.
These tariffs target some of the U.S.’s top trade partners. On Tuesday, Trump put 25% tariffs against Canada and Mexico into effect and doubled the tariffs he imposed against Chinese imports last month, from 10% to 20%.
Energy imports from Canada — including oil, natural gas and electricity — will be taxed only at 10%.
China has already retaliated with its own 15% tariffs on a wide range of U.S. farm exports, and Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum have said they are planning their own retaliatory tariffs.
Mexico and Canada are particularly important players in the automotive industry, supplying more than 20% of the cars and light trucks sold in the U.S. and over $110 billion annually in crude oil.
Detroit Auto Industry Reporter Jeff Gilbert from WWJ radio joined WTOP’s John Aaron and Michelle Basch to discuss how these tariffs could affect the entire auto industry.
Listen to the full interview below or read the transcript, which has been lightly edited for clarity.
John Aaron: Let’s start with the bottom line for us, are sticker prices going to go up?
Jeff Gilbert: Manufacturers likely are going to have to eat at least some of the tariffs. Because affordability is a major issue in the car industry, and consumers just won’t pay sticker prices that are that much higher. Second, it’s going to take a while for any prices to go up, because carmakers have stockpiled some parts, and stockpiled some vehicles across the border so they could weather tariffs of a couple of weeks without it having a major impact.
Michelle Basch: Let’s talk about why this is such a big deal, and why it will have possibly a particular impact on cars. It has to do with how they come in and out of the country, right?
Jeff Gilbert: Exactly. First: the U.S., Canada and Mexico are considered one market, so a lot of vehicles that have American brand names are made in Canada. For example, Chrysler minivans are made in Canada. A lot of pickup trucks are made in Mexico. So they’re made in different countries. And vehicles that are made in the U.S. have parts that come from Canada and Mexico. So it would impact just about every vehicle.
John Aaron: Couldn’t automakers spread this across their entire lineup, even affecting American-made cars, just so that certain models aren’t more impacted than others by the tariffs?
Jeff Gilbert: It would be spread around, because of the price increases on parts that go into vehicles. And what people don’t realize is that parts could cross the border several times. A part could be made in the Detroit area that goes into an engine in Windsor, Ontario, and then that engine comes back into the U.S. to be put into a Ford vehicle that’s made in Ohio.
John Aaron: Do you see any impact in a ripple effect on used vehicle prices?
Jeff Gilbert: It shouldn’t have an impact on used vehicle prices. They’ve already been built, so there are no parts coming in there. But it could have an impact on replacement parts, because they’re made on different sides of the border.
Michelle Basch: As you mentioned, these aren’t supposed to hit buyers for some time, because there is some inventory that’s already in place. Do you think we can ride this out and then before that inventory runs out, these tariffs may be pulled?
Jeff Gilbert: That is what the carmakers are hoping. Because, again, they had a month to prepare for this. And also a little time ahead of that, because Mr. Trump has talked about tariffs. So, they have been planning for this. And in many cases, the carmakers are treating this as a one-time event, like they would with a strike — something that is going to impact the bottom line, but something that they hope is not ongoing. Because if is ongoing, Ford’s CEO has said, and I quote, “This would blow a hole in the market.”
So, long-term, it would be disastrous for the industry. At this point, the carmakers have been in touch with the White House. They’ve tried to let the president know what a major issue this is for them, and they’re hoping that it won’t be a long-term thing.
The Associated Press contributed to this report.
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