Auto suppliers are reassessing their production strategies, exploring ways to relocate manufacturing to the United States or nearby regions to mitigate the impact of tariffs proposed by President-elect Donald Trump. Speaking at CES in Las Vegas, industry executives expressed concerns that higher costs and reduced demand for imported parts could lead to layoffs and alter the way vehicles are assembled.
Trump has pledged to implement tariffs of up to 20% on global imports and as much as 60% on Chinese goods, arguing that these measures will bring back jobs. However, economists warn that such tariffs could trigger inflation, raise consumer auto prices, and weaken demand. This would likely result in job losses, particularly in Michigan, where automakers are already grappling with declining sales and a growing shift toward hybrids and electric vehicles.
Most of the tariffs Trump proposes target Mexico and Canada, the major U.S. trading partners in the negotiated USMCA trade deal. That could threaten millions of Mexican and Canadian jobs, stoking anger at a White House that has been critical of the two nations for not doing enough to stop the flow of illegal drugs and undocumented migrants into the United States.
But tariffs could also have ripple effects on the American automakers that produce cars in those countries and rely on parts and components from them, including Ford, Toyota, and Volvo. In 2022, they saw how closely they depended on Canada when truck drivers blocked the busiest bridge linking Windsor to Detroit for several days. That sparked a crisis that forced the companies to shut down assembly plants and delayed the launch of new models.
Even if automakers could switch suppliers to domestic sources, the cost of making a vehicle could be significantly higher. That could push up the price of imported cars, which are a big part of the market, and push down sales. That could result in less work for suppliers, fewer jobs, a vicious cycle of lower sales, lower production, and more layoffs.
The tariff threat comes at a perilous moment for the auto industry, with global demand for cars sagging, a growing preference for electric and hybrid vehicles, and increasing competition from China-based makers like BYD. Most analysts believe the industry will rebound, but the tariff threat adds uncertainty and creates anxiety that may thwart growth.
Michigan dealers say they won’t know the impact of any tariffs until they see them in action and that the best time to buy a car is now before they go up or as end-of-year deals ramp up. But they also warn that a permanent price increase will be the new normal. That’s likely because most of the parts used to make a car are imported, even if manufactured in the United States. So a double-digit tariff on them will add about $2,500 to the cost of a new vehicle, they say.