The U.S. decision to impose 25% tariffs on all imported cars and key auto parts since 3 April is triggering a domino effect, with car companies reacting differently in recent days. Among them, Stellantis Group, citing the tariffs as the reason, announced the layoff of 900 employees in five U.S. parts factories and the temporary suspension of some factories in Canada and Mexico. Jaguar Land Rover announced a one-month suspension of shipments to the United States. General Motors decided to increase production of pickup trucks at its U.S. plant in Indiana. Meanwhile, U.S. consumers are scrambling to buy stockpiles of cars not affected by the tariffs.

Weighing the rising costs, car companies have come up with countermeasures

Previously, the United States imposed a 2.5 per cent tariff on imported passenger cars and a 25 per cent tariff on trucks. After the 25 per cent tariff increase, the tariffs on passenger cars and trucks soared to 27.5 per cent and 50 per cent respectively. In addition to the entire vehicle, key components such as engines, transmissions, powertrain parts, electronic components and other key components also face the fate of paying an additional 25 per cent tariff. The move will undoubtedly make the cost of imported vehicles steeper.

Once the move was announced, it triggered intense concern and vibration among global car companies, parts manufacturers and major economies. According to S&P Global Mobility (S&P Global Mobility), nearly half of the roughly 16 million new cars sold in the U.S. in 2024 will be imported. Among them, Mexico is the largest supplier of cars to the United States, followed by South Korea, Japan, Canada and Germany.

Highly dependent on the North American industrial chain and the North American market, Stellantis Group took the lead in the response, which was announced on 3 April local time, by the U.S. tariff policy on imported cars, Stellantis decided to lay off five U.S. parts plants 900 employees, and suspend the production business of two assembly plants in Canada and Mexico.

It is reported that the five U.S. plants, including the Warren, Michigan, stamping plant, mainly produces powertrain and stamping parts and components, and supplied to the assembly plants in Canada and Mexico. And now, as a result of the tariffs, the Chrysler assembly plant in Canada will be shut down for a fortnight this month and the Jeep assembly plant in Mexico will be shut down for a month. ‘The medium- to long-term impact of the tariffs on operations is being assessed on an ongoing basis.’ Antonio Felosa, Stellantis' chief operating officer for the Americas, said.

Jaguar Land Rover has also announced a one-month suspension of vehicle exports to the US from 7 April. However, it is worth noting that Jaguar Land Rover had already stockpiled inventory in the US for two months before the tariff measures came into effect, and the company is considering measures to cope with the impact of the tariffs such as raising its selling price in the US, reducing costs and shifting to other markets. Currently, the U.S. is Jaguar Land Rover's largest single market, and Jaguar Land Rover exports nearly 100,000 vehicles to the U.S. each year, accounting for about nearly one-fourth of its total global sales.

Other carmakers are also considering ways to cope with the rising costs. For example, Volkswagen Group plans to add import fees to the list price of cars shipped to the U.S.; Mercedes-Benz is considering withdrawing entry-level models from the U.S.; and Aston Martin, Ferrari, Porsche, Audi and others are considering raising the U.S. price of their cars to offset the impact of tariffs. More than 30,000 Audi vehicles in stock are still available for sale, but it has notified dealers that it is suspending deliveries of vehicles arriving at U.S. ports after 2 April.

Of course, Trump doesn't care. He has said he ‘doesn't care’ if car companies raise prices as a result of the tariffs. He believes that permanent tariffs on foreign-made cars will increase sales of locally made cars in the United States. He has even said that he wants car companies to raise prices because if they do, people will buy American-made cars.

In fact, in response to the tariffs, some car companies are adjusting their production and increasing their output in the United States. As recently as 3 April, General Motors said its plant in Fort Wayne, Indiana, plans to increase production of light trucks. GM CEO Mary Borah also hinted at this at the beginning of the year, when she said, "We have plants in Mexico, Canada, and the U.S. that produce trucks. So we have the ability to shift some of that capacity."

U.S. consumers set off a rush

While Trump doesn't care about car companies raising prices, the average American consumer clearly cares a great deal. Trump signed an executive order on 26 March to increase tariffs on imported vehicles by 25%, which came into effect on 3 April. In time for the tariffs to hit, and for more than a week in between, U.S. consumers snapped up cars in a big way, as they feared the tariffs would cause car prices to rise sharply. According to industry estimates, the 25 per cent tariff increase will raise the price of cars in the US by thousands of dollars.

With dealer inventories being emptied at a rate visible to the naked eye, U.S. sales by major automakers were sharply higher in March, in stark contrast to the car market's weak performance at the start of the year. For example, Toyota was up 8 per cent year-on-year, Honda was up 13 per cent, Ford was up 10 per cent and Hyundai was up 13 per cent. For its part, GM said the company's first-quarter sales were up nearly 17 per cent, with stronger sales of some models imported from Mexico and South Korea.

According to industry data firm Wards Intelligence, U.S. new-vehicle sales were about 3.91 million in the first quarter, up 4.8 per cent from a year earlier. That growth was particularly notable in the 19.2 per cent increase in electric vehicle sales. ‘If we don't buy now, we may both lose the subsidy and pay more tariffs in the future.’ It's this consumer concern that seems to be the most important factor in the short-term boost to the U.S. electric car market. Of course, it's not just cars, either; with the full imposition of tariffs in the U.S., a rush of purchases has been triggered within the U.S., with all sorts of goods being snapped up in supermarkets, from toothpaste and soap to electronics.

In addition, considering the pillar role of automobiles in several countries, it's not just car companies and U.S. consumers who are anxious.

On 3 April, Japan's Ministry of Economy, Trade and Industry (METI) announced the establishment of a ‘U.S. Tariff Countermeasures Headquarters’ to provide a series of support policies, including loans, for export enterprises affected by the tariffs.

On 6 April, South Korean government officials said that the South Korean government plans to provide 3 trillion won (about RMB 15 billion) of emergency financial support to the automotive industry to ease the blow of the new US 25% tariffs. It is learnt that South Korea is one of the countries most seriously affected by the tariffs, with its car exports to the US accounting for nearly half of its total overseas car sales.

In addition, the WTO said on 7 April local time that Canada had requested WTO dispute consultations on the US auto tariffs, and the request was circulated to WTO members on the 7th.

Source: China Automotive News