President Trump’s tariff war has led to almost $25 billion of losses, miring the auto industry’s bottom line. In fact, car manufacturers have seen the biggest loss in profit since the pandemic, and this may just be the beginning. 

While giants like Toyota, General Motors, and Hyundai have paid the most, car companies all across the sector have been absorbing the impact of Mr. Trump’s tariffs, fearing a loss of sales by raising prices. Tariffs on imported car parts cost General Motors $1.1 billion in the second quarter, and that was responsible for a 21% drop in its net income for the period. The company expects tariffs to cost it around 4 to 5 billion by the year’s end. High tariff bills are the norm across the sector: $600 million for Hyundai, more than $500 million for Kia, and $1.5 billion for Volkswagen. 

Stellantis, the parent company of Chrysler, Dodge, Jeep, and Ram, expects their total bill for 2025 to be around $1.7 billion. Even Ford, which builds nearly 80% of its cars in the US, more than any rival, has projected tariff bills to hit $2 billion. 

There is no such thing as an "All-American Car." Surprisingly, every car built in America has at least 50% of its value in imported parts. A big reason for why the industry has been able to shield customers from price increases and remain profitable is largely due to its backlog of car parts stored or imported before tariffs were imposed. For this reason, new vehicle prices are up 1.2% year over year in June, a smaller price increase than expected for an average 10-year period. Consumers are already stretched thin from the effects of tariffs on insurance and interest rates; the last thing automakers want to touch is price. For now, they’re focusing on cutting costs in other ways – and one of those ways is moving factories domestically to the US. But this might not be as easy as Mr. Trump suggests. 

According to Cox Automotive, the hardest part to navigate about the tariff war is the haphazard, on-and-off nature of the policies. Trading partners like Mexico, Canada, and China are constantly in the crosshairs of ever-changing policies, and for auto manufacturers, these sporadic policies don’t provide the confidence investors need to invest billions in new plants in the US. Unlike tariff policies, pouring billions of dollars into shifting production from overseas is not something that can be turned off or delayed back and forth. While Mr. Trump states that tariffs will be in place permanently throughout his term, automakers are unsure how to react after seeing Canadian and Mexican tariffs announced and then delayed a couple of times this year. Car companies are not in the right mindset to be investing in the current trade policy environment. 

And even if they do, there is no way to shift production and pivot so quickly that consumers will never feel the price increase. 

Trump’s plan for car manufacturers to move production domestically to the US may have further unintended consequences. With car companies' profits dwindling, such a move could saddle them for years to come. While GM notes that it prioritizes maintaining stable prices to support consumers and dealers, it remains unclear how long the car industry can sustain this approach. Declining revenue and income will become the new norm for automakers throughout the rest of this year as higher tariffs and costs on imported parts continue. Eventually, these costs will have to trickle down to the consumers. 

The 2026 model year may be a prime time for price increases. Auto executives anticipate pricing will rise around 4 to 8% before cars risk being outpriced. In addition to sticker prices rising, auto executives predict costs will be passed on to consumers in other ways—for instance, a 1.5% financing deal could subtly rise to 3.5%, or a $2,500 cash back might fall to $1,500 cash back.

Beyond higher prices, consumers will also see dwindling options, especially for younger, first-time car buyers. Due to Washington’s radical turn to complete EV support, including revoking EV tax credits and attempting to halt a $5 billion program for expanding EV charging stations, automakers are forced to lean into their more profitable SUVs and trucks.

Automakers are projected to introduce just 71 new EVs, which is half the amount originally projected. Not only that, this year will see a meager 29 all-new models arrive in show runs, the lowest number in decades. Over 159 models are expected to be launched over the next four years, and traditionally, it’s 200. 

Mr. Trump’s tariff policies are designed to protect Americans. Are you feeling protected?