Tariffs envisioned by the Trump administration on Canadian and Mexican goods may add $4,000 to $10,000 to the cost of each car and truck, a a consultant said Friday.
“There will be a consumer reaction,” Patrick Anderson, CEO and principal of Anderson Economic Group, said during an Automotive Press Association webinar.
“We will see significant cutbacks,” he added. “There will be a significant effect on employment and production” in the North American auto industry.
President Donald Trump on Feb. 1 implemented tariffs of 25% on Canadian and Mexican goods. Two days later, he paused the tariffs for 30 days. On Feb. 11, Trump reinstated 25% on steel imports and boosted tariffs on aluminum to 25%.
In North America, vehicles and parts are shipped across borders, often multiple times. If the 25% tariffs on Canada and Mexico go into effect, they would be levied throughout the production process.
“It’s not a sustainable situation,” said Anderson, whose firm is based in East Lansing, Michigan. Makers of vehicles and parts would not be able to absorb the extra costs stemming from the tariffs, he said.
“Everything here leads to cars costing more,” Anderson said.
Production cutbacks would be larger than the fall of 2023, when the United Auto Workers union went on strike against General Motors Co., Ford Motor Co. and Stellantis, the consultant said.
“You are going to see a decline in domestic auto production,” he said.
Consumers, he said, would put off vehicle purchases. “You’d see increased demand for used cars.”
Anderson also spent part of his presentation discussing the outlook for electric vehicles.
The administration of former president Joseph Biden promoted adoption of EVs as a way to reduce greenhouse gas emissions. That led to forecasts that EVs could account for 50% or more of U.S. vehicle sales by 2030.
The Anderson consulting firm is forecasting that EV sales may reach 21% by 2030. Trump wants to eliminate a $7,500 federal tax credit for EV purchases. “If they end the purchase subsidy, you will see a decline in EV sales,” the consultant said.
EV costs (both for vehicle prices and charging) are holding back sales, Anderson said. Also a factor, he added, is the lack of charging networks.
In Michigan, Anderson said, “We are way, way behind in charging infrastructure.”
Anderson purchased an EV in 2020. “I can’t take my car to Detroit and back reliably” because of the lack of charging stations, he said. East Lansing is about 90 miles from Detroit.
