Trump Tariffs Push for ‘American-Made’ Cars—But They Don’t Exist

As the Trump administration prepares to impose 25 percent tariffs on foreign cars and auto parts, the conversation around boosting American-made vehicles has intensified. But the reality is that achieving a fully domestic supply chain for cars made in the U.S. is a complex challenge, as industry experts point out.

The idea of producing cars with 100 percent American parts is far from feasible, given that U.S. carmakers currently rely on a global network for sourcing nearly 30,000 components. Stephanie Brinley, a principal automotive analyst at S&P Global Mobility, emphasized the impracticality of such a transition, stating, “It won’t happen. I don’t envision a space where 100 percent of the parts for any vehicle are produced in the United States.”

Despite this reality, President Trump’s rationale for imposing tariffs revolves around promoting American-made vehicles. However, major automakers like General Motors (GM) and Toyota still manufacture a significant portion of their U.S.-sold cars in foreign countries. Even companies like Tesla, known for their domestic production, rely on imported parts for their vehicles. The complexity of the supply chain means that achieving complete localization would be a costly and time-consuming endeavor.

Electric vehicle challenges

Electric vehicles, with their simplified components compared to traditional cars, also face sourcing challenges. Countries like China play a crucial role in providing lithium-ion batteries, essential for EVs. The process of localizing production for such components is lengthy and resource-intensive, underscoring the hurdles in achieving full domestic sourcing.

The ripple effects of tariffed components are expected to impact various sectors within the automotive industry. Higher repair costs, increased dealer expenses, and rising insurance premiums are just some of the consequences that consumers and businesses may face as a result of the tariffs.

While certain exemptions exist for parts sourced from Canada and Mexico under the US-Mexico-Canada trade agreement, the broader implications of tariff implementation are significant. The intricate nature of the industry’s supply chain, where components cross borders multiple times during assembly, further complicates the issue.

Estimates suggest that consumers could see price hikes ranging from $5,000 to $10,000 per vehicle, with the impact becoming more pronounced in the months following the tariffs’ enforcement. The interconnectedness of the industry means that understanding the full extent of the tariff effects will be challenging for consumers.