Written by Cláudio Afonso | LinkedIn | X
Wedbush Securities said on Friday that U.S. President Donald Trump’s newly announced 25% tariff on all foreign-made vehicles and auto parts could spark chaos across the global auto industry and trigger sweeping price increases that can go up to $15,000.
In an executive order issued Wednesday, Trump said the tariff will take effect April 2, with enforcement beginning the following day. Further details on the measure, including additional tariff actions, are expected next week.
“Over the last 24 hours we have spoken to many in the auto industry from around the US, Europe, and Asia and the conclusion is this tariff announcement (in its current form) would send the auto industry into pure chaos and raise the average price of cars between $5k on the low end and $10k to $15k on the high end,” Wedbush analysts wrote in a note.
Ferrari has already responded, saying it will raise prices on certain models “by up to 10%” after April 1 to offset the impact. “Every automaker in the world will have to raise prices in some form selling into the US and the supply chain logistics of this tariff announcement heard around the world is hard to even put our arms around at this moment,” the firm added.
The tariff would affect even US automakers, given their reliance on globally sourced components.
“Even US automakers that produce cars in the US have ~40%-50% of auto parts that come from abroad. A US car with all US parts made in the US is a fictional tale not even possible today,” Wedbush wrote.
“In our view it would take 3 years to move 10% of the auto supply chain to the US and cost hundreds of billions with much complexity and disruption.”
GM currently builds 52% of its vehicles sold in the US at domestic facilities, while 30% come from Canada and Mexico and 18% from other regions. Ford’s US production stands at 77%, with 21% sourced from Canada and Mexico and 2% from elsewhere.
Wedbush called the proposed tariff “a back breaker and Armageddon for the auto industry globally” and warned it “throws the supply chain into pure panic mode.” The firm estimates the policy would add $100 billion in annual costs to the sector — a burden that would “essentially get passed directly onto the consumer and clearly erode demand on Day 1 of tariffs.”
No Clear Winner — Not Even Tesla
Wedbush said no company stands to benefit from the tariff — not even Tesla, which manufactures most all of its US vehicles domestically. In this case, the company will only face tariffs on the parts it imports to the US. However, CEO Elon Musk warned that tariffs still impact the company.
“The winner in our view from this tariff is no one….as even Tesla still is hit from these tariffs and will be forced to raise prices. We continue this initial 25% tariff on autos from cars outside the US is almost an untenable head scratching number for the US consumer,” the analyst Dan Ives wrote.
Ives added that investors should expect more clarity in the week ahead, but for now, the firm said the industry remains in shock. “We expect to learn more over the next week into April 2 but for now investors will be bewildered by this announcement…..as this tariff announcement/25% number is hard to digest and will continue to put major pressure on GM and other auto makers/suppliers until more clarity happens from the White House,” the note said.
Trump Warned Against Price Hikes
Trump’s decision followed a series of warnings to domestic automakers, urging them not to pass added costs on to US consumers. According to a Wall Street Journal report citing people familiar with the matter, Trump warned CEOs and senior executives during calls in early March that they “better not raise car prices because of tariffs.”
The report said the former president warned that “the White House would look unfavorably on such a move,” leaving some executives “rattled and worried they would face punishment if they increased prices.”
JPMorgan analyst Ryan Brinkman said Thursday that the 25% tariff could eliminate General Motors’ global profit and reduce Ford Motor Co.’s by about 75%. He forecasted a “$14 billion cost to General Motors (amounting to essentially all of its global profits) and a $6 billion cost to Ford (amounting to ~75% of global profits).”
Smaller electric-vehicle manufacturers are more vulnerable. In a note Thursday, Bernstein analyst Daniel Roeska said Rivian and Polestar could face “added strain due to import-heavy supply chains and limited pricing power.” He added that localization “will become essential.”
The European Union is weighing a response. According to the Financial Times, the EU is considering hitting US services exports, including Big Tech’s operations, in retaliation for the tariff policy.
