According to The Wall Street Journal, President Donald Trump warned the heads of several leading car manufacturers against increasing their prices because of tariffs. He emphasized that such a move would be viewed negatively by the White House, which led some of these executives to worry about possible retaliation if they did decide to raise prices.
On Wednesday, Trump declared a 25% tariff on auto imports, a decision the White House claims would support the growth of domestic manufacturing. However, this could also create financial pressure on carmakers who rely on international supply chains for production.
Trump further stated that automakers should feel grateful for the elimination of the previous administration’s program that aimed to promote electric vehicle manufacturing. He also suggested that the tariffs would benefit these manufacturers by encouraging the return of production to the U.S.
“You’re going to see prices going down, but it’s going to go down specifically because they’re going to buy what we’re doing, incentivizing companies and even countries with companies to come into America,” Trump remarked during an event where he unveiled the new tariffs.
Despite this, car manufacturers and their suppliers have expressed concerns that the tariffs will force them to raise prices, and that shifting production back to the U.S. might take years, as reported by the Journal.
“Tariffs, at any level, cannot be offset or absorbed,” Ray Scott, the CEO of parts supplier Lear, wrote in an email to his employees that was obtained by the Journal. “A holistic, industrywide approach will be necessary to mitigate the impact.”
Morgan Stanley analysts have estimated that vehicle prices could increase by 11% to 12% as a result of the tariffs.
A spokesperson for Trump clarified to the Journal that the tariffs are intended to restore the strength of American manufacturing, revitalize Main Street, and prioritize the interests of the American people.
One executive from a major car company expressed confusion over the seeming contradiction between imposing tariffs and simultaneously prohibiting price hikes by manufacturers. “The math would tell you that’s going to cost us multibillions of dollars,” said the auto executive. “So who pays for that?”
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