Investors rushed to sell shares in top car companies after former President Donald Trump announced a sharp increase in tariffs on imported vehicles and parts. The 25% tax stunned the global auto industry, leading to fears of higher prices, job losses, and production cuts.
The move shook the stock market. BMW, Toyota, and Jaguar Land Rover lost billions in combined value. American automakers also took a hit, with General Motors’ stock falling over 7%. Tesla, however, remained stable due to its domestic production and ties to the Trump administration.
But even Tesla could not avoid the impact. CEO Elon Musk warned that the company would still face extra costs under the new policy.
“Tesla hasn’t escaped damage here,” Musk posted online. “These additional costs will definitely hurt operations.”
Auto Industry Faces Rising Costs and Disruptions
Patrick Masterson, an automotive researcher, pointed out that Tesla’s Model Y uses only 70% American-made parts.
“No vehicle is completely built in the US,” he said. “Every buyer will feel these new expenses.”
The entire auto industry is bracing for higher costs. Analysts expect car prices to rise between $4,000 and $12,000, depending on how much of a model is imported. Many manufacturers produce some models in the US but still rely on foreign parts. Toyota, for example, operates ten US plants but imports its Prius line from Japan. Volkswagen builds vehicles in America but still depends on parts from Mexico and Korea. General Motors also imports many parts and vehicles.
Oxford Economics said that carmakers might shift production to US plants but warned of major side effects. Moving factories could reduce production in other countries, leading to job losses abroad.
Luxury brands may suffer the most. Audi, Mercedes-Benz, and Jaguar Land Rover face higher import costs. Ferrari responded immediately by raising US prices by 10% to offset the tax.
Fewer Choices and Higher Prices for US Consumers
With rising costs, companies may choose to increase prices, absorb losses, or leave the US market entirely. Economist Patrick Anderson warned that American consumers could have fewer car options at higher prices. Brands like Porsche, which lack major US plants, may cut production overseas to balance costs.
Mitsubishi is among the hardest hit, as it imports every car it sells in the US. Hyundai, which still ships most of its vehicles from South Korea, announced plans for a US factory, but that will take time.
The tariff decision follows Trump’s previous moves to protect US industries. Steel and aluminum already face a separate 25% tax, and Chinese goods have been taxed over 20%. Trump also imposed tariffs on imports from Canada and Mexico, though some exemptions remain in place.
The White House confirmed that the car tariffs would begin on April 3, with parts tariffs rolling out a month later. Canada and Mexico received a temporary exemption for parts, but experts say that relief may not last long.
Billions in Added Costs for Automakers
JP Morgan estimated that General Motors could face up to $10.5 billion in extra costs under the new policy. Ford is expected to pay at least $2 billion, with costs likely to double once parts tariffs take effect. The total cost to the industry could exceed $80 billion.
Jennifer Safavian, president of Autos Drive America, said manufacturers are still processing the news.
“They’re still absorbing the impact,” she said. “But these tariffs will absolutely reshape the US car market.”
Many industry leaders remain silent as they assess the full consequences. While some companies may shift production to avoid higher taxes, others could pull out of the US market entirely.