The U.S. auto industry is bracing for a major financial blow as former President Donald Trump’s new 25% tariffs on imported vehicles and parts are set to take effect on April 3. The tariffs, described as “draconian” by analysts, are expected to drive up costs for General Motors (GM), Ford Motor (F), and Ferrari (RACE), with billions of dollars in expenses looming. The move is also likely to force automakers to raise vehicle prices, further squeezing consumers.
Automakers Brace for Massive Tariff Costs
According to JPMorgan analysts, the tariffs will significantly impact major automakers’ earnings and market outlook. GM, which imports vehicles from South Korea, Canada, and Mexico, is expected to face an initial tariff bill of $10.5 billion, potentially rising to $13 billion over time. Ford will be hit with a smaller yet still substantial bill of $2 billion, which could eventually increase to $4.5 billion.
Luxury automaker Ferrari will also suffer from the new tariffs. The company has already announced it will raise prices on U.S. exports by as much as 10% to offset the added costs. However, certain Ferrari models, including the 296, SF90, and Roma, will be exempt from the price hikes.
The tariffs will have a broad impact on the industry, which imports nearly half of all vehicles sold in the U.S. and approximately 60% of vehicle parts. The financial toll is expected to be significant. JPMorgan revised its annual impact estimate for the industry from $41 billion to $82 billion.
Stock Prices React to Tariff News
Trump’s tariff announcement sent shockwaves through the stock market. GM shares dropped 3% immediately following the news and fell as much as 6.5% the next day. Ford stock slipped 2%, while Ferrari’s stock initially fell by 5% before recovering slightly with a 1.6% gain on Thursday.
JPMorgan slashed its price targets for the three automakers. GM’s price target was lowered from $64 to $53 per share, while Ford’s was cut from $13 to $11. Ferrari’s target was reduced from $525 to $460 per share.
Higher Vehicle Prices on the Horizon
With automakers facing massive tariff-related expenses, consumers are likely to feel the effects through higher vehicle prices. According to JPMorgan, light-vehicle prices in the U.S. could rise by as much as 11.4% if automakers pass the costs onto consumers.
The Michigan-based Anderson Economic Group previously estimated that a 25% tariff on vehicles imported from Mexico and Canada would add between $4,000 and $10,000 per unit to the price of vehicles assembled in North America. The new tariffs on aluminum and steel will add further costs, tacking on an estimated $250 to $800 for gas-powered cars and up to $2,500 for electric vehicles.
Long-Term Impact on the Auto Industry
Trump has indicated that the tariffs are likely to remain permanent. Despite efforts by automakers to minimize the impact, the industry is bracing for lasting damage. With higher production costs and the likelihood of price increases, domestic automakers may temporarily gain a pricing advantage. However, the overall industry is expected to suffer from declining sales and profitability as affordability declines.
The tariffs are particularly concerning for electric vehicle (EV) makers. Trump has expressed strong opposition to EV subsidies and policies, adding further uncertainty to the sector’s growth prospects.
