Back on April 22, a coalition of U.S. auto industry groups penned a letter to Donald Trump urging him not to impose 25% auto tariffs on car parts that are imported. The letter warned that doing so would result in a drop in vehicle sales and raised prices. Trump has made it clear that he intends to impose the tariff by May 3. Trump’s tariffs have already caused Subaru to move car production out of the U.S. to avoid Canadian trade wars.
Tariffs Will Cause Higher Prices
“Tariffs on auto parts will scramble the global automotive supply chain and set off a domino effect that will lead to higher auto prices for consumers, lower sales at dealerships, and will make servicing and repairing vehicles both more expensive and less predictable,” the letter reads.
The letter was written by industry groups that represent General Motors, Hyundai, Toyota Motor, Volkswagen, and others. The letter was sent to U.S. Trade Representative Jamieson Greer, Treasury Secretary Scott Bessent, and Commerce Secretary Howard Lutnick.
Auto Tariffs Could Cause Bankruptcy
According to USA Today, “The letter was signed by the Alliance for Automotive Innovation, the trade group representing nearly all major automakers, the American Automotive Policy Council, representing the Detroit Three automakers, the National Automobile Dealers Association, as well as MEMA, also known as The Vehicle Suppliers Association, and others.”
“Most auto suppliers are not capitalized for an abrupt tariff-induced disruption. Many are already in distress and will face production stoppages, layoffs, and bankruptcy,” the letter added. “It only takes the failure of one supplier to lead to a shutdown of an automaker’s production line.”
Trump’s Tariffs Start May 3
Trump announced back on April 14 that he was looking into placing 25% auto tariffs on foreign car part imports from Canada, Mexico, and other countries. He believes the auto tariffs will pressure automotive companies to make their products in the U.S.
Last week, the Ford Motor Co. said it may be forced to raise prices on its new vehicles if Trump does not back off his auto tariffs. It is estimated that Trump’s tariffs would escalate costs for all U.S. automakers by more than $108 billion this year.
Subaru To Move Production Out Of U.S.
Trump’s tariffs have already caused Japanese car giant Subaru to announce it will be moving its car production out of the U.S. Subaru is reconfiguring its supply chain to avoid Trump’s auto tariff war.
Subaru sold more than 17,700 cars in Canada that were made in the U.S. last year. Those numbers make up a quarter of the company’s sales. However, in 2026, Subaru’s location in Canada will cut down U.S. imports to 10 percent of all cars sold in Canada and will begin importing more inventory from Japan.
Subaru’s Outback, for instance, will no longer ship to Canada from the U.S.; all models will be made in Japan. Subaru says the move is being made to minimize the impact of the Trump administration’s counter tariffs.
