Auto Industry Could Be Collateral Damage In Trump’s Trade Wars

President Trump’s trade wars threaten to claim a casualty on the home front: the U.S. auto industry.

Trump’s tariffs could raise the price of the average new car—already approaching $49,000—by $3,000 or more. I Photo: General Motors Canada

If Trump proceeds with 25% tariffs on imports from Canada and Mexic, he will disrupt more than $300 billion in annual U.S. automotive trade with its two neighbors, wreck supply chains that have been operating for decades, and push up the price of new cars, Paul Wiseman and Alexa St. John reported for the Associated Press (AP).

The tariffs pose an “existential” threat to North American auto production, said David Gantz, a fellow at Rice University’s Baker Institute for Public Policy.

“They will push up the cost of everything imported from Mexico or Canada that goes into a car assembled in the U.S.”

Kelley Blue Book estimates that Trump’s tariffs could raise the price of the average new car—already approaching $49,000—by $3,000 or more. The cost of some full-size pickup trucks could increase by as much as $10,000.

The economic impact would worsen if Canada and Mexico retaliate with tariffs on U.S. exports, which they would be compelled to do.

“The economic impact of a sustained 25% tariff on Canada and Mexico would be severe, with full tit-for-tat retaliation likely pushing Canada and Mexico into recession and the U.S. toward stagnant growth,” wrote Andrew Foran of TD Economics.

Foran estimates that the tariffs could reduce annual auto sales by 13.6% in Canada and 10.6% in the U.S.