Donald Trump surprised virtually everyone on Wednesday by announcing plans to impose wide-ranging 25% tariffs on cars imported into the United States. The tariffs, set to go into effect on April 2, will be levied on every vehicle that isn’t made in the United States. This decision has been wildly controversial among economists and industry experts. In doing so, they are alerting the Federal Reserve to certain catastrophic repercussions, including potential price hikes nationwide.
The administration’s plan to impose new tariffs on imported vehicles was first announced by Trump way back in February. We know that the president is deeply convinced that the U.S. trading partners are ripping us off. He believes that bringing in tariffs is the most effective way to address the issue. This announcement has understandably caused an uproar from all angles.
Allies in DC shot back almost immediately, with industry groups across the board lighting up with alarm at the possible economic fallout. Shares of most automakers were down sharply in after-hours trading. At the same time, U.S. equity index futures pointed to another down day for stocks in America on Thursday. According to White House official Will Scharf, the new tariffs will bring in more than $100 billion per year in revenue. This huge injection of new revenue will reverberate throughout the entire economy.
The international community has not been passive either, raising strong objections. European Union officials and Canadian Prime Minister Mark Carney have denounced Trump’s tariff scheme. Carney called it a “perverse attack” on Canadian workers. This public comment is a reflection of pervasive concern over how it will impact employment and our trading partnerships.
"We will defend our workers, we will defend our companies, we will defend our country, and we will defend it together." – Mark Carney
One of the biggest worries among economists is that it will raise costs for American consumers. Indeed, one of the largest concerns with the tariffs is that they will drive up vehicle prices and hurt vehicle affordability and demand. For Candace Laing, the potential for job loss and an exodus of North America’s automotive leadership was concerning.
"Throwing away tens of thousands of jobs on both sides of the border will mean giving up North America’s auto leadership role, instead encouraging companies to build and hire anywhere else but here," – Candace Laing
Despite these warnings, Trump remains confident in his approach, assuring the public of success.
"Have no fear, we will WIN everything!!!" – Donald Trump