Trump’s 25% auto tariff is about to send shockwaves through the global car industry, but not every manufacturer is feeling the pain equally. Some are scrambling for alternatives, others are bracing for price hikes, and a few are stuck in a corner with nowhere to run.
The Big Losers
For high-end European brands like Audi, Porsche, and Ferrari, the impact is immediate. These brands rely entirely on imports, meaning every car they sell in the U.S. is now 25% more expensive overnight. Luxury buyers might shrug at a price hike on a $200,000 Ferrari, but for Porsche and Audi, where models start under six figures, the market reaction could be more severe.
BMW and Mercedes, which sell roughly a quarter of their global output in the U.S., have a more complex problem. Half of their U.S. sales are assembled locally, mainly in plants in the South. But those vehicles still rely on imported engines, transmissions, and other key components. That means costs are rising across the board.
Stellantis, the parent company of Chrysler, Jeep, and Dodge, faces a different risk: demand destruction. Nearly 60% of its U.S. sales come from locally assembled vehicles, but many buyers in its price-sensitive market segments won’t absorb a major price hike. A drop in sales volume could hit Stellantis harder than a direct tariff.
Volkswagen’s exposure is more muted, with the U.S. accounting for only a mid-teen percentage of its global sales and many components sourced within North America. Renault is the lucky one—it has zero U.S. market exposure. But that’s cold comfort when it just lost ground in China and faces mounting financial pressure at home. With 600,000 employees and powerful unions resisting cost cuts, Volkswagen may be in the worst position of all. They’re trapped between tariffs and declining global demand.
Prices Are Going Up—No Matter What Trump Says
The White House is warning automakers not to pass costs onto consumers, but that’s a tough ask. Even before tariffs, automakers had limited pricing power, with inflation and high borrowing costs already dampening demand. According to Morgan Stanley, dealerships have built up a two- to three-month inventory buffer, meaning the real impact of tariffs may not hit sticker prices until May. When it does, they estimate vehicle prices could rise 11-12%.
The Federal Reserve is watching closely. Boston Fed President Susan Collins acknowledges that tariffs will push inflation higher, though the duration is uncertain. Richmond Fed President Thomas Barkin, however, downplays the risks, saying consumers might not feel the full impact of the 25% tariff. But automakers and suppliers aren’t taking chances—cost-cutting measures and supply chain adjustments are already underway.
Retaliation is Coming
Europe isn’t taking this lying down. The EU is preparing countermeasures that could hit U.S. service exports, particularly in Big Tech. They’re also reportedly softening their stance on fines for Apple and Meta, likely to avoid further escalation with Washington. China, meanwhile, is playing the long game. President Xi told foreign CEOs that China remains an “ideal investment destination,” though behind the scenes, Chinese manufacturers are scrambling to find new markets. The U.S. consumer is irreplaceable, and Beijing knows it.
Short-Term Pause for Energy Tariffs
While the auto sector takes the hit, Trump is treading more carefully in energy. Industry executives have warned about the inflationary risks of new tariffs on oil and gas, and for now, the White House seems to be listening. Energy tariffs appear to be on hold, at least until the economic impact of the auto tariffs becomes clearer.
The global economy is shifting, and automakers are just the first domino to fall. Supply chains are being rewritten, trade alliances are shifting, and price shocks are coming. Whether the tariffs achieve their intended goal of boosting American manufacturing remains to be seen, but for now, the only certainty is higher costs for businesses and consumers alike.
Sources:
https://x.com/KobeissiLetter/status/1905279897725006185
https://x.com/ZackEiseman/status/1905536943816876360
https://x.com/MikeZaccardi/status/1905597258659184718