Trump’s invoices leave automakers with harsh, accurate options

The automakers can respond to President Trump’s new 25 % invoices to imported cars and accessories in various ways. But all this costs money and will lead to higher car prices, analysts say.

Manufacturers can try to transport production from countries such as Mexico to the United States. They can try to increase the number of cars they already do here. They can stop selling imported models, especially those that are less profitable.

But whatever the car manufacturers decide, car buyers can wait to pay more for new and used vehicles. Estimates vary widely and depend on the model, but the increase may range from about $ 3,000 for a car built in the United States in over $ 10,000 for imported models.

These figures do not take into account additional invoices that Mr Trump said he would announce next week to punish countries that impose invoices on US goods. He has also said that he will further increase invoices if commercial partners such as Canada and the European Union increase invoices in response to his car invoices, leading to a gradual trade war.

“It will be annoying and expensive for US consumers for several years,” said Michael Cusumano, a professor of administration at the Mit Sloan School of Management.

Mr Trump has long been invoices. But many car executives hoped that his threats were a negotiating tool. Mr Trump broke these hopes on Wednesday, when he told the White House that the invoices were “100 percent” permanently.

Mr Trump framed the invoices as a way to bring cars back to the United States. United Automobile Workers Union agreed, saying that the automakers could reopen plants to places such as Lordstown, Ohio or expand production in cities such as Warren, Mich.

“It is now the automakers, from the three big to Volkswagen and Beyond, to bring back good jobs to the US,” said Shawn Fain, president of UAW, in a statement on Wednesday, referring to General Motors, Ford Motor and Stelantis, owner of Chrysler, Ram.

But factory relocation is expensive and time consuming. Highways usually take at least two years to create a new assembly line and ensure that the vehicles it produces meet the quality standards. In order to completely avoid invoices, they should also carry devilish complex supply chains that often include suppliers in dozens of countries.

Invoices could encourage companies to choose locations in the United States instead of Mexico or Canada when they think about where to expand production or build a new model. But choosing a space due to invoices, and not because it is the most effective place for construction, will come at a cost for consumers.

Some companies may hesitate to make these decisions, which can cost hundreds of millions of dollars because they are worried that Mr Trump, despite assurances to the contrary, can change his mind. Or the next president could reverse his invoices.

“What we hear from many customers is:” How do we justify capital spending without knowing if it is a long -term process? “, said Kevin Williams, a senior director at the Clark Hill Law Office who specializes in trade.” Make this investment and two years from now on, “it doesn’t matter.”

The highways, many of which refused to comment, will probably avoid transferring the full cost of invoices to consumers. If they increase prices too much, sales could fall, leading to a death spiral to sink revenue and increasing costs. Economists are worried that the financial disorder caused by invoices could help cause recession.

Some highways have stored spare parts and finished cars before invoices, but this will only keep prices for a while.

“Invoices are just going to make people pay more for cars and people will buy fewer cars,” said WC Benton, a professor of business and supply chain management at the University of Ohio.

The new cars are already beyond the range of many Americans – the average selling price these days exceeds $ 48,000, according to Cox Automotive. Used cars prices are also expected to increase, as they did during the pandemic, as more buyers are looking for affordable options.

Most automakers are not extremely profitable and have a limited economic space for maneuvering. General Motors, which is one of the most profitable companies, had a net sales profit last year by 3.2 %. As a result, manufacturers should pass much of the cost of invoices to their customers.

If so, invoices could add $ 15,000 to a $ 1500 RAM receipt, nearly $ 12,000 to a pickup of Toyota Tacoma, $ 9,000 in a Subaru Forester SUV and $ 6,000 to a Nissan Sentra sedan, according to Isecars estimates, an online car market site.

Some car manufacturers are already increasing prices. Ferrari, whose Italian sports cars sell for hundreds of thousands of dollars, said on Thursday that it will increase prices by 10 percent to some models in response to invoices.

The automakers can stop selling some less profitable models, which tend to be smaller and more affordable. They will promote domestic cars and trucks, many of which are larger and more expensive. All major highways, including foreign brands such as Mercedes-Benz, BMW, Volkswagen, Honda and Toyota, have large factories in the United States.

But no car will be free from invoices, because they all have foreign components, which usually represent at least one -third of the value of the vehicle. This section will be subject to a 25 %invoice, according to Trump’s administration.

“There is no such thing as an American car,” said Simon Geale, an executive vice -president of Proxima, a consulting company that advises companies on supplies.

Some car manufacturers may avoid making major changes in their activities in response to invoices, betting that the consequences will be so serious that Trump’s administration should return.

“There will be an incredible reaction from US consumers,” Mit’s Cusumano said “I hope there will be an answer to it.”

Ana swanson They contributed reports.