Automakers can respond to President Trump’s new 25 percent tariffs on imported cars and parts in several ways. But all of them cost money and will lead to higher car prices, analysts say.
Manufacturers can try to move production from countries like Mexico to the United States. They can try to increase the number of cars they already make here. They can stop selling imported models, especially ones that are less profitable.
But whatever carmakers decide, car buyers can expect to pay more for new and used vehicles. Estimates vary widely and depend on the model, but the increase could range from around $3,000 for a car made in the United States to well over $10,000 for imported models.
Those figures do not take into account additional tariffs that Mr. Trump said he would announce next week to punish countries that impose tariffs on U.S. goods. He has also said he would increase tariffs further if trading partners like Canada and the European Union raise tariffs in response to his auto tariffs, leading to an escalating tit-for-tat trade war.
“It’s going to be disruptive and expensive for American consumers for several years,” said Michael Cusumano, professor of management at the MIT Sloan School of Management.
Mr. Trump has long brandished tariffs. But many auto executives had hoped that his threats were a negotiating tool. Mr. Trump dashed those hopes on Wednesday when he said at the White House that the tariffs were “100 percent” permanent.
Mr. Trump framed the tariffs as a way to bring car manufacturing back to the United States. The United Automobile Workers union agreed, saying automakers could reopen plants in places like Lordstown, Ohio, or expand production in cities like Warren, Mich., where auto workers have been laid off.
“It is now on the automakers, from the Big Three to Volkswagen and beyond, to bring back good union jobs to the U.S.,” Shawn Fain, the U.A.W. president, said in a statement Wednesday, referring to General Motors, Ford Motor and Stellantis, owner of Chrysler, Jeep and Ram.
But relocating factories is costly and time consuming. Carmakers usually need at least two years to set up a new assembly line and ensure that the vehicles it produces meet quality standards. To fully avoid tariffs, they would also need to relocate devilishly complicated supply chains that often involve suppliers in dozens of countries.
Tariffs could encourage companies to choose locations in the United States instead of Mexico or Canada when they are contemplating where to expand production or build a new model. But choosing a site because of tariffs, and not because it is the most efficient place to manufacture, would come at a cost to consumers.
Some companies may hesitate to make those decisions, which can cost hundreds of millions of dollars, because they worry that Mr. Trump, despite assurances to the contrary, may change his mind. Or the next president could reverse his tariffs.
“What we hear from a lot of clients is, ‘How do we justify that capital expenditure without knowing if this is a long-term process?’” said Kevin Williams, a senior director at the law firm Clark Hill who specializes in trade. “You make that investment and two years from now they say, ‘Never mind.’”
Carmakers, several of which declined to comment, will probably avoid passing on the entire cost of the tariffs to consumers. If they raise prices too much, sales could plummet, leading to a death spiral of sinking revenue and rising costs. Economists worry that the financial disruption caused by tariffs could help provoke a recession.
Some carmakers have been stockpiling parts and finished cars before tariffs kick in, but that will hold down prices only for a while.
“Tariffs are just going to make people pay more for cars, and people will buy fewer cars,” said W.C. Benton, a professor of operations and supply chain management at Ohio State University.
New cars are already beyond the reach of many Americans — the average sale price these days is more than $48,000, according to Cox Automotive. Prices of used cars are also expected to rise, as they did during the pandemic, as more buyers look for affordable options.
Most automakers are not extremely profitable and have limited financial room to maneuver. General Motors, which is among the more profitable companies, had a net profit on sales last year of 3.2 percent. As a result, carmakers will have to pass much of the cost of tariffs on to their customers.
If so, tariffs could add $15,000 to the price of a Ram 1500 pickup, nearly $12,000 to a Toyota Tacoma pickup, $9,000 to a Subaru Forester S.U.V. and $6,000 to a Nissan Sentra sedan, according to estimates by iSeeCars, an online car buying site.
Some carmakers are already raising prices. Ferrari, whose Italian-made sports cars sell for hundreds of thousands of dollars, said Thursday that it would increase prices by as much as 10 percent on some models in response to tariffs.
Automakers may stop selling some less profitable models, which tend to be smaller and more affordable. They will promote domestically made cars and trucks, many of which are larger and more expensive. All major carmakers, including foreign brands like Mercedes-Benz, BMW, Volkswagen, Honda and Toyota, have large factories in the United States.
But no cars will be exempt from tariffs because all have foreign-made parts, which typically account for at least a third of the vehicle’s value. That portion will be subject to a 25 percent tariff, according to the Trump administration.
“There’s no such thing as an American car,” said Simon Geale, an executive vice president at Proxima, a consulting firm that advises companies on procurement.
Some carmakers may avoid making big changes to their operations in response to the tariffs, betting that the consequences will be so severe that the Trump administration will have to backpedal.
“There’s going to be an incredible backlash from American consumers,” said Mr. Cusumano of M.I.T. “I would hope there would be some response to that.”
Ana Swanson contributed reporting.
