On May 3, the Trump administration plans to go ahead with a 25% tariff on all imported automotive parts. This recent decision has raised a considerable outcry from U.S. automotive interests. In an unusually bipartisan display, six major think tanks of the U.S. automotive world have joined forces. Unsurprisingly, the Coalition has written a letter to key administration officials, cautioning that these tariffs could destabilize domestic automotive production.
On April 21, the announcement of the letter going to top Administration officials. It was directed to U.S. Treasury Secretary Scott Bessent, U.S. Dept of Commerce Secretary Howard Lutnick, and U.S. Trade Representative Ambassador Jamieson Greer. The signatories include powerful members of the franchised dealer and supplier community. Nearly every major automaker is participating too, a sign of just how crucially important this issue has become across the entire sector.
The U.S. automotive industry is the most integrated industry in America, supporting nearly 10 million American jobs across all 50 states. Every year, it pours about $1.2 trillion into the economy. As a highly strategic, critical manufacturing sector, it’s known for having very complex supply chains that are vulnerable to any kind of disruption. The letter emphasizes that even the failure of a single supplier can halt an entire production line for automakers, leading to widespread consequences for employment and production continuity.
The pending tariffs would cause a likely reduction in vehicle sales of several million units. Moreover, they are projected to significantly increase costs for new and used vehicles. According to Wall Street and automotive analysts, this future will result in a massive increase in expenses across the industry. They estimate that tariffs would increase costs by more than $100 billion.
Of course, President Donald Trump is willing to assist the automakers who might be hit with those tariffs. He, purportedly at least, wants to give them more time to adjust or increase domestic vehicle production themselves. He released this strong statement on April 14, ahead of the new tariffs, calling for exactly the same thing.
The heads of the six policy groups voiced their grave concerns in their letter, stating, “Most auto suppliers are not capitalized for an abrupt tariff-induced disruption. Many are already in distress and will face production stoppages, layoffs, and bankruptcy.”
They further noted the interconnected nature of the automotive supply chain. “It only takes the failure of one supplier to lead to a shutdown of an automaker’s production line. When this happens, as it did during the pandemic, all suppliers are impacted, and workers will lose their jobs.”
The group highlighted a crucial point regarding supply chains: “We support more manufacturing and additional supply chains that run through the United States, but it is not possible to reroute global supply chains overnight or even in months. This will take time.”
As the July 1 deadline for the tariffs approaches, industry leaders still push for a federal re-examination. They identify a hopeful parallel with the recent tariff relief granted for consumer electronics and semiconductors. They recommend applying the same kind of treatment to automotive parts as well.
“President Trump has indicated an openness to reconsidering the administration’s 25 percent tariffs on imported automotive parts – similar to the tariff relief recently approved for consumer electronics and semiconductors. That would be a positive development and welcome relief.” – Heads of the Alliance for Automotive Innovation, American International Automobile Dealers Association, Autos Drive America, MEMA Original Equipment Suppliers, National Automobile Dealers Association, and American Automotive Policy Council.