Written by Cláudio Afonso | LinkedIn | X
Donald Trump’s decision to impose a 25% tariff on all foreign-made vehicles and parts came after weeks of behind-the-scenes warnings to US automakers, urging them not to pass on the costs to consumers.
The former US president said Wednesday that his administration would implement the new tariff starting April 2, with enforcement beginning the next day.
Since early March, Trump has held several calls with CEOs and top executives of major US carmakers and told them they “better not raise car prices because of tariffs,” according to a Wall Street Journal report.
The report, which cites people familiar with the topic, said Trump 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.”
Detroit automakers have been in regular contact with Trump or members of his administration. In those conversations, Trump and Commerce Secretary Howard Lutnick pushed the industry to shift more assembly and parts production to the US.
Trump met earlier this month with General Motors CEO Mary Barra and Ford Motor Co. CEO Jim Fairley to discuss the impact of the tariffs. GM builds 52% of the vehicles it sells in the US at domestic facilities, with 30% coming from Canada and Mexico, and 18% from other regions. Ford produces 77% in the US, 21% in Canada and Mexico, and 2% elsewhere.
According to the report, Trump told the executives they “should be grateful for his elimination of what he called former President Joe Biden’s electric-vehicle mandate,” and argued that tariffs would bring manufacturing back to the US.
Trump “made a lengthy pitch for how they would actually benefit from tariffs,” claiming the policy would help the industry more than previous presidents had.
Automakers are already responding to the policy. Ferrari said Thursday it would increase prices on some models by “up to 10%” to offset the new tariffs.
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 forecast 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).”
GM shares fell 7.4% on Thursday, extending Wednesday’s 3% loss. Ford shares dropped nearly 4% on Friday.
Ford’s exposure is somewhat limited. JPMorgan estimates that roughly 10% of Ford’s US sales are imports from Canada and Mexico. Of the $125 billion Ford reported in US revenue in 2024, about $110 billion is tied to new vehicle sales, implying around $11 billion in imports.
Adjusting for lower average selling prices on models like the Bronco Sport, Edge, Maverick, and Mustang Mach-E, the effective import value drops to $9 billion—resulting in a $2 billion tariff on finished vehicles.
Tesla assembles all the vehicles it sells in the US domestically, leaving it much less exposed than legacy automakers such as General Motors Co., Ford Motor Co., and Stellantis. However, CEO Elon Musk warned that tariffs still impact the company.
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.
