Kenny Polcari, chief market strategist at SlateStone Wealth, and Leo Kelly, CEO of Verdence Capital Advisors, discuss President Donald Trump’s tariff strategy and its implications for the economy.
On Wednesday, President Donald Trump revealed new tariffs on imported automobiles during a press briefing at the White House.
The president announced a significant increase in the auto import tariff to 25%, up from the previous rate of 2.5%. These tariffs are set to come into effect on April 2, coinciding with the anticipated announcement of his reciprocal tariff plans.
Trump believes that tariffs can serve as a means to generate tax revenue to support his tax cut initiatives while also stimulating the revival of domestic manufacturing. He previously indicated that he might implement auto tariffs around “25%.”
In his comments from the Oval Office, Trump stated that the tariffs “will contribute to the establishment of numerous plants—automobile plants specifically—and you will witness employment numbers that have never been seen before. It may take a short period of time initially, but you will see excellent construction figures, and ultimately, many individuals will be engaged in car manufacturing.”
TESLA WARNS OF RETALIATORY TARIFFS DURING TRADE TENSIONS
President Donald Trump claimed that the 25% auto tariffs will bolster U.S. automotive manufacturing. (Anna Moneymaker/Getty Images / Getty Images)
The responses from automakers regarding Trump’s tariff initiatives varied during discussions he had with them.
“Manufacturers with factories in the U.S. are pleased. Those without will need to establish operations here quickly to avoid tariffs. It’s quite straightforward. Most of them already possess significant manufacturing facilities in this country,” he explained.
The Canadian government has indicated its intention to impose retaliatory tariffs. Ontario Premier Doug Ford remarked on X that Trump’s 25% tariffs “on vehicles and light trucks will only serve to raise costs for hard-working American families.”
TRUMP THREATENS ADDITIONAL TARIFFS ON CANADIAN METALS, ELECTRICITY, AND VEHICLES
The U.S. imported nearly $500 billion in automotive products in 2024. (Photo by Kevin Dietsch/Getty Images / Getty Images)
According to industry group analyses, these tariffs could lead to thousands of dollars in increased costs for consumers purchasing vehicles. This escalation in costs might prompt automakers to reduce production, potentially leading to job losses within the sector, as noted by the Center for Automotive Research.
In the previous year, the U.S. imported $474 billion worth of automotive products, which included $220 billion in passenger cars. The leading suppliers were Mexico, Japan, South Korea, Canada, and Germany, all of which are close allies of the U.S.
UAW LEADER PRAISES TRUMP’S TARIFFS ON CANADA AND MEXICO AS A MOVE TO ‘STOP THE LOSS’ OF U.S. JOBS
Cox Automotive reported on Wednesday that without exemptions for the auto sector’s imports from Canada and Mexico, the price of U.S.-made vehicles could rise by approximately $3,000, while car prices for those manufactured in Canada or Mexico could increase by $6,000.
It anticipates that by mid-April, there will be disruptions affecting “nearly all” North American vehicle production, potentially leading to a reduction of around 20,000 vehicles produced daily, amounting to roughly a 30% decline in production.
The auto supply chain in North America is closely interconnected among the U.S., Canada, and Mexico, governed by the USMCA outlined during Trump’s first term. (Photographer: Emily Elconin/Bloomberg via Getty Images / Getty Images)
“Over time, we foresee a drop in sales, an increase in both new and used vehicle prices, and the possibility of certain models being phased out if these tariffs persist. We have yet to receive information regarding tariffs affecting the European Union, Japan, and South Korea,” stated Cox Chief Economist Jonathan Smoke in a report by Reuters. “In summary, lower production, restricted supply, and higher prices are imminent, echoing the circumstances from 2021.”
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On Wednesday, markets decreased in response to the tariff announcement, with the S&P 500 falling by 1.12%. Stocks of automakers also saw a dip, with Tesla down by 5.6% and General Motors declining by 3.1%.
Reuters contributed to this report.
