Trump announces new auto tariffs; what it means for Michigan

• President Donald Trump on Wednesday announced 25% tariffs on light vehicle imports and key automotive parts 
• Industry experts say the move could have major implications in Michigan, an auto industry hub
• Auto unions cheered the move, while government officials in Canada vowed retaliation 

President Donald Trump announced broad tariffs targeting the auto industry Wednesday, the latest in a series of trade escalations that could have an outsize impact on Michigan’s economy. 

Speaking in the Oval Office Wednesday afternoon, Trump announced 25% tariffs on foreign-made cars and light trucks, predicting that the domestic automobile business will “flourish like it’s never flourished before” even as Michigan automakers’ stocks tumbled in the wake of his announcement.

However, others urged caution as upheaval ripples across the industry, from parts suppliers to showroom floors, said Glenn Stevens, executive director of MichAuto and vice president at the Detroit Regional Chamber.

“This means jobs lost and increased pressure on the balance sheets of companies large and small,” Stevens said as companies brace for sales and production changes. 

Trump said the tariffs will officially take effect April 2 alongside an additional round of "reciprocal" tariffs on other imports, including pharmaceuticals and lumber. Collections on imported vehicles and key parts are set to begin April 3, and Trump characterized those tariffs as “permanent.” 

“We’re going to have a market the likes of which nobody's ever seen before, not in this country,” Trump told reporters Wednesday.

Here’s what we know so far: 

What the tariffs cover, and why

The 25% tariffs announced Wednesday are set to extend to all finished light vehicle imports coming into the US. 

Key automobile parts such as engines, transmissions, powertrain parts and electrical components will also be subject to tariffs, “with processes to expand tariffs on additional parts if necessary,” White House officials said in a statement. 

The stakes are especially high in Michigan, where auto industry supply chains blur borders. Roughly $77 billion in goods cross the Canadian border each year, and the state trades another $69 billion with Mexico. 

Some auto parts cross between Canada and the US several times before an auto leaves an assembly line.

More than 280,000 Michiganders work in auto industry jobs, and the state has more than 2,200 automotive supplier and technology center facilities, according to data from MichAuto at the Detroit Regional Chamber.

The president has argued tariffs are necessary to rectify trade imbalances and encourage foreign and domestic companies alike to manufacture their cars in the US. 

Companies can avoid the tariffs, Trump said, if cars and key parts are manufactured domestically. He called the existing supply chain “ridiculous” and predicted the tariffs would encourage cars “to be made in one location.” 

At least one Democrat supported the goal of bringing more manufacturing back to the US. 

“Tariffs, when applied strategically, are a valuable tool to support American manufacturing and competitiveness,” said US Rep. Debbie Dingell, D-Ann Arbor in a statement.

But she also urged patience for the massive changes that will be made by the auto industry. 

“We need to remember we must allow the auto companies and suppliers the time they need to adjust,” she said. “Production changes can’t take place overnight. “

Impacts on US automakers

Wednesday’s news comes after auto companies sought and received a one-month reprieve from tariffs on products manufactured in Mexico and Canada that comply with rules under the US-Mexico-Canada Agreement, a trade deal Trump initially signed in 2020. 

Michigan automakers and suppliers were not surprised by Trump’s move, since he had previously signaled the plan, said Stevens, of MichAuto.

The move is likely to cause economic upheaval across the industry, Stevens said, as shifting demand ripples through the supply chain. Consumers, meanwhile, are likely to face higher prices and fewer choices in the marketplace.

Meanwhile, Stevens said, companies that export vehicles to the U.S. will need to make decisions on whether existing facilities in the US have capacity for new models or can be expanded. 

“This is by no means a quick process,” he said, “as safety, quality, and process requirements are stringent to build the most complex consumer product in the world.”

While Trump expressed expectations that new assembly plants will result from his tariff move, Stevens said any decision to build will result in a multi-year process for automakers. 

New construction “will require very strategic market decisions … capital, the economic development selection process, and the availability of an hourly and skilled trade workforce,” Stevens said. 

“These are complex decisions that will take time, long past when the tariffs' impact will be felt within the industry.”

The Detroit Three automakers, all with headquarters and some assembly plants in Michigan, all saw their stocks fall in value shortly after Trump’s announcement. 

General Motors, Ford Motor Co. and Stellantis, the parent company of brands like Dodge and Chrysler, each slid between 5% and 6%.

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How could Michigan auto factories be affected?

The United Auto Workers cheered the move Wednesday.

“These tariffs are a major step in the right direction for autoworkers and blue-collar communities across the country,” UAW President Shaun Fain said in a statement. 

He continued: “it is now on the automakers … to bring back good union jobs to the U.S.” 

The easiest path, the union said on Wednesday after Trump’s announcement, could be realized in months by adding additional shifts in underutilized auto plants. 

Production declined by 2 million units per year over the past decade across a dozen Detroit Three factories, the UAW said. 

Several of them are in Michigan, according to the UAW. They include: Ford Flat Rock Assembly, Ford Michigan Assembly in Wayne, GM Lansing Grand River, GM Factory Zero in Detroit and Hamtramck, Stellantis Warren Truck Assembly, Stellantis Sterling Heights Assembly and Stellantis Jefferson North Assembly in Detroit. 

“The economic benefits of filling these plants back up with product and good auto jobs would be enormous and have a cascading effect throughout communities,” the UAW said. 

Where does tariff money go? Who pays it?

Customs officials collect the tax from the company that is importing the goods, and the money goes to the US Treasury.

Companies generally pass along some or all of that additional cost to consumers, economists say.

Will car prices rise? 

Experts have warned tariffs could also increase car prices for consumers, with estimates released during earlier tariff announcements saying increases could range from $4,000 to $10,000 per vehicle.

An estimated 45% of vehicles sold in the US will fall under the new tariffs, according to an estimate by S&P Global Mobility. 

The top five exporters to the US are Japan, Mexico, South Korea, Canada and Germany. 

Models from Audi, BMW,  Volkswagen and Volvo are often obvious imports, but brands with a heavy American research and manufacturing presence also are often imported. These include Honda, Hyundai, Toyota and Lexus, along with Detroit Three models including some Buicks and Fords. 

What will other countries do? 

Canada, the European Union and China had already begun rolling out retaliatory tariffs and possible non-tariff escalations after Trump initiated broad tariffs on foreign imports early in his term.   

More could be coming.

Ontario Premier Doug Ford said Wednesday that he fully backed retaliatory tariffs to Trump’s auto announcement, writing in a social media post that Canada “needs to stand firm, strong and united.”