Report: Trump's Tariffs Will Increase Vehicle Prices From $4,000 To $10,000

LANSING – The US government, just hours before the asserted midnight effective date, released notices imposing new tariffs on Canada and Mexico goods. These notices order the imposition of tariffs starting 12:01 am on March 4 under new section “9903.01.01” of the Harmonized Tariff Schedule of the United States.

The Anderson Economic Group, LLC of the cost per vehicle of these tariffs have been widely quoted, and imply cost increases of $4,000 to $10,000 for most North American assembled vehicles. (Some BEVs could see tariff costs of $12,000 or more.)
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The Bloomberg story linked below highlights the huge impact such tariffs would have on American autoworkers and the many small and medium sized businesses who work in the supply chain for the automobile industry.
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This portion of this story appeared in The Hill:

As we have noted numerous times over the past 3 months, the US and Canada and Mexico have benefited from integrating our manufacturing of automobiles across three countries. These tariffs, if imposed as now seems inevitable, will have very negative effects on workers and consumers. As the The Wall Street Journal editorial board wrote, they will punish workers in auto manufacturing states such as Michigan.
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The tariffs will affect well over $1 trillion worth of imported goods. Canada, Mexico and China exported a combined $1.4 trillion of goods to the U.S. in 2022, worth more than 5 percent of gross domestic product (GDP) in that year.

Trump has made multiple tariffs announcements that he has subsequently reversed or paused, but the Tuesday tariffs mark the largest escalation so far in the substantial overhaul of U.S. trade policy that Trump promised during his campaign.

Here’s how the policy shift will affect Americans.

Short-term market turmoil

Stock markets fell off a cliff on Monday following remarks by President Trump that there was “no room left” for Canada and Mexico to negotiate on tariffs.

The stock rout continued on Tuesday morning, with the Dow Jones Industrial Average of big U.S. companies falling by more than 685 points on the day, a loss of 1.6 percent.

The S&P 500 index closed with a loss of 1.3 percent and the technology-heavy Nasdaq Composite ended the day down 0.4 percent.

Investment bank Goldman Sachs has estimated that the 25-percent tariff on Canada and Mexico along with the incremental tariffs on China would reduce their earnings-per-share forecasts for the S&P by between 2 and 3 percent.

Goods could get more expensive

Many businesses and market forecasters have been warning that Trump’s import taxes could translate into consumer price increases.

“Tariff-induced disruptions risk exacerbating inflation, increasing the cost of essential goods, and placing financial strain on businesses and consumers alike,” the National Association of Wholesale Distributors, a trade group, warned in a Tuesday statement.

Tariffs don’t translate directly into price increases, and businesses can respond to them in various ways, including just eating the cost increase. Trump’s 2018 tariffs did not cause a major spike in inflation in the way that the 2020 coronavirus pandemic did.

However, disruptions resulting from companies’ altering their supply chains over highly integrated North American production pipelines could result in higher consumer prices. One estimate from the Anderson Economic Group found that the cost-per-car for certain automobiles produced in North America could increase by $12,000 at the high end.

Import taxes could be a drag on U.S. economic performance

Some economic models show the tariffs taking a bite out of GDP.

Real GDP growth is 0.6 percentage points lower in 2025 and 0.1 points lower in 2026 as a result of the tariffs, according to the Yale Budget Lab.

The tariffs will be felt more acutely by Americans at the lower end of the income spectrum, the group found.

“The percent change in disposable income resulting from the tariffs is almost 3 times as much for households in the second decile by income as it is for households in the top decile,” Yale forecasters wrote.

While the economy has been performing well in recent quarters, a slowdown could be on the horizon as consumers have been pulling back on their spending amid concerns about elevated inflation.

The Atlanta Fed is predicting a contraction in the U.S. economy for the first quarter of this year.

The influential Teamsters labor union said that tariffs could be worth a ding to the economy if they help to bolster domestic industries.

“We support any solution that brings work back to America,” a spokesperson for the group said in a statement to The Hill.

Political and cultural blowback

Trump campaigned on lowering costs for Americans, riding a wave of anger over inflation all the way to the White House. The cost of living was one of the top issues for voters in the 2024 election.

Higher prices resulting from Trump’s tariffs, along with potentially diminished U.S. economic performance, could harm Trump’s appeal on the economy – perhaps his biggest strong suit with voters.

Some Republicans have recognized the potential price impacts of the tariffs. Sen. Markwayne Mullin (R-Okla.) told a reporter Tuesday that he was “of course” worried about the effects of the tariffs on his state.

Meanwhile, Democrats have been leaping on the potential economic vulnerabilities posed by the new tariffs.

“It’s only taken the president 43 days to wreak havoc on our economy and the American people,” top Democratic tax writer Richard Neal (Mass.) said in a Tuesday statement. “The outlook for economic growth has plummeted into the negative, consumer sentiment has plunged, and small businesses and farmers from coast-to-coast fear what’s to come with his trade war.”

The tariffs could also strain cultural ties between the U.S. and its North American neighbors. Following the initial February announcement of tariffs on Canada and Mexico, Canadian Prime Minister Justin Trudeau told Canadians not to vacation in the U.S.

YouGov polling this week found that 50 percent of Canadians now view the U.S. as either “unfriendly” or an “enemy,” while just 6 percent of Americans feel the same about Canada.

Will the tariffs last?

Trump has delayed and reversed some tariff orders while in office, and the same thing could happen again.

After implementing tariffs on Chinese shipments worth $800 or less, Trump pulled that order two days later when packages started piling up at U.S. ports of entry.

Businesses are hoping for a similar about-face on the Tuesday tariffs.

“We urge reconsideration of this policy and a swift end to these tariffs,” Neil Bradley, the chief policy officer at the U.S. Chamber of Commerce, a top business lobby, said in a Monday statement.

Mexican President Claudia Sheinbaum, who has called Trump’s tariff threats as a negotiating bluff in the past, said that Mexico would respond to them with retaliatory measures on Sunday, provided they are not lifted before then.

“We have decided to respond with both tariff and non-tariff measures that I will announce in a public square on Sunday,” she said.