What Trump’s Tariffs Could Do to the U.S. Auto Industry

Kate Aronoff, New Republic -As markets reel from Wednesday’s tariff announcements, the U.S. auto industry is continuing to figure out its next steps. Roughly 46 percent of vehicles sold here last year were made in other countries. Investment analysts at Bernstein Research estimate that 57 percent of the parts that make up vehicles assembled in the United States are sourced abroad; those items are due to face tariffs by May 3. GM—which imports 48 percent of the vehicles it sells in the U.S., and sources less than 40 percent of its parts domestically—could face a 79 percent drop in earnings before interest and taxes, Bernstein estimates.

Automakers had lobbied to exempt vehicles made in Mexico and Canada that comply with the terms of the U.S.-Mexico-Canada Agreement, or USMCA.  The Trump administration is subjecting them to the 25 percent tariff anyway. The value of U.S.-made parts included in those cars will be deducted from the total amount that gets assessed, however. For example: A car made in Mexico that costs $40,000 would be subject to a $10,000 levy if it’s shipped to the U.S. If that car contains $5,000 worth of U.S.-made parts, it’d be charged $8,750—i.e., 25 percent of $35,000.