Trump auto tariffs could "significantly impact" U.S. car demand, Citi says
Investing.com - U.S. President Donald Trump’s announced tariffs on automotive imports could cause a "significant" dent in domestic car sales, according to analysts at BofA.
In a note to clients, the brokerage flagged that much of the 16 million units sold annually in the U.S. are imported, including as much as 50% of light vehicle sales.
Roughly 3.6 million of passenger cars brought into the U.S. came from Mexico and Canada in 2024, while 900,000 units were from Europe, 1.3 million from Japan and 1.4 million from South Korea, the analysts led by Stephanie Vincent said.
"Thus, tariffs could significantly impact end-market demand," Vincent said.
Trump said he plans to slap the tariffs on global automotive imports into the U.S. starting from April 3, following through on a prior pledge to place a trade tax on overseas car and truck manufacturers.
Speaking at the Oval Office on Wednesday afternoon, Trump added that the duties will apply to “all cars not made in the U.S."
The statement appeared to exclude possible carve-outs for Mexico and Canada, two countries that play a pivotal role in the process of car construction in North America and have a free-trade agreement with the U.S. that was signed during Trump’s first term in office.
Trump has argued that his tariffs are necessary to offset lost revenues from proposed tax breaks and help bring industrial jobs back to the U.S. It remained to be seen what responses U.S. trading partners would roll out, although leaders from Canada and the European Union criticized Trump’s pronouncement.
Shares in American automakers, including Ford, General Motors (NYSE:GM), and Jeep-parent Stellantis (NYSE:STLA), sank on Thursday following Trump’s pronouncement. However, analysts at Bernstein predicted U.S.-based auto firms may "see a lower impact" from the tariffs than their international rivals.
Instead, carmakers that "do not produce cars in the U.S., like Mitsubishi or [Tata Motors-owned] Jaguar Land Rover, will likely face prohibitive levels of tariffs severely reducing U.S. profitability," they flagged.
The total cost of Trump’s auto tariffs could amount to around $100 billion, or roughly 14% of the sector’s annual revenues, according to calculations from Bernstein.
Analysts from the brokerage added that, when dividing that figure by the approximately 16 million cars purchased in the U.S. every year, the levies would translate into about $6,250 in additional cost for every vehicle.
Trump has said that a tax deduction for auto loan interest was forthcoming, but BofA’s Vincent flagged that this would only apply to domestically-produced cars.
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