Report: New Auto Tariffs Could Impact Consumer Spending Across Economy
New U.S. tariffs on automobiles and auto parts reportedly may lead to a reduction of consumer purchasing power and spending across the economy.
The effect of the tariffs is likely to be longer lasting than the supply chain shocks the automotive sector experienced during the pandemic, as the President Donald Trump administration’s aim to reshape the sector by locating more manufacturing in the United States could take years, Reuters reported Monday (March 31).
In addition to raising the cost of vehicles by as much as $10,000 or $20,000 — according to one of the “more aggressive estimates” cited in the report — the pressure the tariffs put on consumer real purchasing power and spending could lower economic output by 0.2 percentage points, according to the report.
Administration officials’ efforts to increase domestic manufacturing and employment in the automotive sector would undo the international integration of the industry that has kept the prices of new cars steady since the North American Free Trade Agreement (NAFTA) was signed in 1992, the report said.
In addition, raising the price of imported cars and parts may lead to domestic manufacturers seeing an opportunity to raise their own prices as well, per the report.
It was reported Saturday (March 29) that moving more production to the U.S. may offset some of the tariff impact, but such a shift could be costly and could take companies years to do if they choose to.
When Trump signed the order Wednesday (March 26) that imposes the tariffs, the White House’s Rapid Response 47 account posted on social platform X that the move aimed to stop a flood of imports that threatens the country’s industrial base and exposes it to global supply chain vulnerabilities.
“This is very exciting to me,” Trump said in a video shared by the account. “This is the automobile industry, and this will continue to spur growth like you haven’t seen. Before I was elected, we were losing all of our plants — they were being built in Mexico and Canada and other places. Now those plants largely have stopped and they’re moving them to our country.”
In a Monday post on X, Rapid Response 47 linked to an article by Crain’s Detroit Business, commenting: “TRUMP EFFECT: Lear considers production moves to U.S. as auto suppliers grapple with tariff pressures.”
TRUMP EFFECT: Lear considers production moves to U.S. as auto suppliers grapple with tariff pressureshttps://t.co/oQ1trZANJM
— Rapid Response 47 (@RapidResponse47) March 31, 2025
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