Auto manufacturers and dealers anticipate the tariffs will drive up prices and stifle demand for new vehicles.
ARLINGTON, Texas — President Donald Trump says the United States will begin levying a 25 percent tariff on imports from Canada and Mexico at midnight Monday, worrying automakers and car dealers.
Few industries would be more impacted by Trump’s new economic policy than the automotive sector. The tariff would apply each time a particular item crosses the United States border, meaning some car parts could be taxed multiple times before their installation.
The president contends tariffs will force corporations to relocate plants to the United States. He also says he’ll use tariffs as leverage in immigration policy negotiations with Mexico and Canada.
“It’s very exciting for the automobile companies,” Trump said in a news conference Monday.
The auto industry has not approached the matter with similar enthusiasm.
“We continue to believe that vehicles and parts that meet the USMCA’s stringent domestic and regional content requirements should be exempt from the tariff increase,” American Automotive Policy Council President Matt Blunt said. “Our American automakers, who invested billions in the U.S. to meet these requirements, should not have their competitiveness undermined by tariffs that will raise the cost of building vehicles in the United States and stymie investment in the American workforce.”
Economists agree that, in the short term, tariffs will drive up prices. Those costs will be passed on to consumers, they say.
Arlington Mayor Jim Ross fears higher prices will scare off customers, potentially prompting manufacturers to roll back production. General Motors’ plant in Arlington is among Tarrant County’s largest employers.
More than 5,000 people assemble GM’s SUVs at the Abram Street facility.
“My job as mayor is to do everything in my power to protect those gainfully employed individuals,” Ross told WFAA. “That’s why I’m passionate about saying, ‘Enough with the tariffs.'”
Ross and San Antonio Mayor Ron Nirenberg penned a letter to U.S. Senators John Cornyn and Ted Cruz, calling the threat of tariffs “job-killing.”
“We already have a great manufacturing plant making every SUV for General Motors right here,” Ross said. “Let’s not upset that apple cart by putting tariffs on this and pushing that cost onto U.S. consumers.”
“Now, we’re jeopardizing what we’ve created here in Texas with these types of threats,” he added.
An Anderson Economic Group study indicated the tariffs would be more disruptive to the automotive industry than the record-breaking United Auto Worker’s strike against General Motors in 2024.
They estimated a 25 percent tariff on imports from Canada and Mexico would increase the cost of producing North American-assembled cars by between $4,000 and $10,000.
But those price increases would not be immediate, since most car dealers have enough vehicles on their lots to last two or three months.
“You’ve got time before the parts actually get to the manufacturer and go onto the cars,” said April Ancira, past chair of the Texas Auto Dealer’s Association. “That’s about 2-4 months out, depending on the type of vehicle you buy. If you are concerned, I’d say come on in now.”
Ancira owns several dealerships in San Antonio. She said she fears higher prices will sink demand, forcing dealers to cut prices and accept losses on new vehicles. In that scenario, Ancira predicts customers would still pay more than they would before the tariffs’ implementation.
“There is not a clear winner in the short-term,” Ancira said. “There is a lot of hoping going on right now. We’re hoping that it doesn’t happen.”
If there is a silver lining, reduced demand might prompt the Federal Reserve to cut interest rates. Those savings could mitigate the impact of costs related to tariffs, Ancira said.
Dealers are likely to buy up more used cars to maintain a cheaper inventory, she added.
The stock market shuddered Monday, minutes after Trump indicated the tariffs would take affect. The auto industry will now wait to see whether Canada and Mexico retaliate, driving prices higher.
