The US Trump administration has proposed a 25% tariff on cars imported from Canada and Mexico which, naturally, has caused some concern within the industry. Although the tariffs have been put on temporary hold for a month, many are wondering how they could impact the automotive industry, and how the policy aligns with the broader Trump goal of supporting the American industry and consumers.
According to the Trump administration, the tariffs would aim to level the playing field for American OEMs, address trade imbalances and create jobs. Supporters say the new trade rules would strengthen US production and manufacturing, incentivising investment in American-made vehicles. However, opponents claim that these tariffs could increase costs for consumers and disrupt international supply chains.
Go deeper with GlobalData
We spoke to Curt Hopkins, CEO of MCQ Markets to discuss the potential impact of import tariffs and what they could mean for the automotive industry.
Just Auto (JA): Can you provide some background on the company?
Curt Hopkins (CH): MCQ Markets is a platform for investing in fractionalised shares of iconic automobiles. We make the tokenization of these high-value collector cars accessible to investors by offering SEC-qualified offerings in this asset class comprised of rare and exotic luxury appreciating automobiles.
Our platform caters to both passionate enthusiasts and strategic investors, bridging the gap between automotive culture and financial innovation.
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By GlobalData
Could you explain the proposed US tariffs and what they aim to achieve?
The proposed tariffs target automobile imports from Canada and Mexico, in particular, with the goal of boosting domestic production and reducing US reliance on foreign manufacturing.
The idea is to level the playing field for American automakers, but these policies often come with an unintended economic price—raising costs, disrupting supply chains, and putting strain on both businesses and consumers.
How could tariffs impact the automotive industry?
Essentially tariffs increase the cost of imported materials and finished vehicles, which means higher production costs for automakers and rising prices for consumers.
Car manufacturers will be forced to either absorb the costs—impacting profit margins—or pass them down to buyers. In both scenarios, the industry faces tightened margins, pricing volatility, and potential shifts in consumer demand.
Where will the greatest disruption be geographically?
The biggest impact will be felt in North America, especially within the US, Canada, and Mexico, given their deep integration in automotive manufacturing.
States like Michigan, Ohio, and Kentucky, which are hubs for car production, will most likely feel the supply chain challenges the most. Additionally, markets with strong import reliance—such as California and New York—will experience higher sticker prices on new and used cars.
How can firms, especially automotive suppliers, mitigate the risks that tariffs pose?
Firms should diversify supply chains, explore domestic manufacturing incentives, and reassess pricing strategies. Some companies may shift production to tariff-free regions or negotiate better supplier agreements to offset rising costs. Leveraging technology and automation to improve efficiency will also help reduce reliance on cost-sensitive imports.
How would an international trade war damage the global automotive industry and its offerings to consumers?
A trade war creates pricing instability, supply shortages, and reduced consumer confidence. If manufacturers face increased costs across multiple countries, competition weakens, and car prices surge.
This could slow innovation, delay new model rollouts, and limit vehicle availability for consumers for an unknown period of time.
Is there a trade-off between highs prices for consumers and strengthening US manufacturing?
There’s definitely a delicate balance to be struck here and where that lies is up for debate. Encouraging domestic manufacturing is important, but protectionist policies often lead to unintended cost burdens. Tariffs raise prices for raw materials, making it more expensive for automakers to build cars in the US. The net result? Consumers pay more, demand slows, and the surrounding economy absorbs the shock. The challenge is finding long-term solutions that support US jobs without triggering inflationary pressures.
Studies suggest that if the US were to bring all auto manufacturing back to the US, then capacity would have to increase by 75%, requiring a $50bn investment by the industry.
What do you see the future holding for the tariffs?
The outcome depends on political negotiations and economic pressure. Automakers, suppliers, and trade groups are already pushing back, which may lead to revisions or exemptions for certain goods. In the short-term, pricing volatility is likely, but over time, market forces and trade agreements could adjust the playing field.
The key takeaway? Companies and investors should prepare for uncertainty and stay agile.
Further, if tariffs impact new car prices, prices for used and collector cars would likely increase. In times of uncertainty, our platform provides investors access to exclusive automotive assets, potentially serving as a hedge against market volatility induced by policy changes.
See also: Trade tariffs: Automotive suppliers should ‘review their contracts’
