Trump warns auto industry: No car price hikes after tariff shake-up

Trump warned US automakers not to raise prices in response to his latest 25 per cent tariff on imported vehicles and parts, despite industry concerns over rising costs and inflation

In a high-stakes call with top US automakers earlier this month, US President Donald Trump issued a warning: Do not raise car prices in response to his new tariffs, reported The Wall Street Journal.

 

According to sources familiar with the conversation, Trump cautioned executives that the White House would not look favourably on price increases. His remarks left some industry leaders concerned about possible repercussions if they moved to offset costs by raising vehicle prices.

 

On the other hand, Trump positioned his recent policy moves as a boon to the industry, highlighting his rollback of what he called former President Joe Biden’s “electric-vehicle mandate”. He argued that his tariff strategy would benefit automakers in the long run by bringing more manufacturing jobs back to the US and decreasing reliance on foreign supply chains.

 

 

‘Tariffs will be great’ 

On Wednesday, Trump announced a sweeping 25 per cent tariff on all imported vehicles and parts, set to take effect on April 2. The move is expected to put immediate cost pressures on US carmakers, most of whom depend on foreign-made components to assemble vehicles, even those manufactured domestically.

 

“You’re going to see prices going down,” Trump said, suggesting that his policies would incentivise companies, and even entire countries, to invest in US manufacturing.

 

However, industry players remain skeptical. Detroit’s biggest automakers and key suppliers have signalled that tariffs will inevitably lead to higher costs, which will likely be passed on to consumers. 

 

Automakers sound the alarm 

“Tariffs, at any level, cannot be offset or absorbed,” warned Ray Scott, CEO of automotive supplier Lear, in an internal email obtained by The Wall Street Journal. “A holistic, industrywide approach will be necessary to mitigate the impact," he said.

 

According to analysts at Morgan Stanley, the new tariffs could push vehicle prices up by 11 per cent to 12 per cent once existing dealer inventories run out, likely around May. Many dealers have stockpiled cars to delay the immediate impact, but the long-term effects appear unavoidable.

 

Despite Trump’s warnings, it remains unclear what actions his administration might take if automakers do raise prices. Federal regulatory approvals are crucial for car companies, making them vulnerable to political pressure. Trump has previously used executive authority to target businesses he views unfavourably. 

 

Inflation worries loom large 

While Trump has been publicly bullish on his economic strategy, insiders say his economic team is concerned about inflation, even if the president rarely addresses it directly.

 

“It is difficult to see how imposed tariffs over time would not have some impact on prices,” said Matt Blunt, president of the American Automotive Policy Council, which represents General Motors, Jeep-parent Stellantis, and Ford.

 

Meanwhile, Kush Desai, a Trump campaign spokesperson, defended the trade approach, stating, “Restoring Main Street, re-establishing American manufacturing dominance, and putting the American people first are the only interests guiding President Trump’s decisions.”

 

Industry braces for fallout 

Across the automotive industry, from major manufacturers to small suppliers, companies are scrambling to adjust to the new reality of Trump’s tariffs. 

Executives have expressed frustration at the conflicting messages: Impose tariffs but keep prices low.

 

“The math would tell you, that is going to cost us multi billions of dollars,” one auto executive said. “So who pays for that?”

 

Automakers have already begun lobbying efforts in Washington. Stellantis, in an email to US dealers, slammed the tariffs as unfairly benefiting European and Asian competitors and encouraged dealers to press lawmakers for intervention. 

“We encourage you to contact your federal and state representatives to share your opinion on a matter that threatens to disrupt our business,” the email read.