It’s been fascinating to watch the auto industry and media react to President Donald Trump’s tariffs. To the degree that this topic has broken through the usual phantasmagoria of new-product launches and nostalgic musings about old cars, the predominant attitude seems to have been that Trump’s threats were just negotiating tactics. Don’t worry, be happy.
It’s true that the president gave credence to that assumption when last month he backed off a 25-percent tariff on Mexican and Canadian exports to the United States. But Trump now says the tariffs will be imposed as of Tuesday, March 4.
The stock market fell in response to Trump’s latest remark, with the S&P 500 down 1.7 percent and the Nasdaq falling 2.6 percent (Jones, 2025). This is playing out as the Federal Reserve Bank of Atlanta projected that the country’s gross domestic product would decline in the first quarter of 2025 by 2.8 percent. As recently as Feb. 19 a growth rate of 2.3 percent was predicted (Smith, 2025).
It doesn’t take a genius to recognize that economic chaos isn’t ideal for a new president whose election appears to have hinged on the assumption that he could do a better job of improving the economy (Farmer, 2024).
So perhaps Trump will once again figure out a way to declare victory while revoking the tariffs. But what if he doesn’t? The potential for the latter scenario seems to be sinking in among the auto industry’s chattering class.
Criticisms of Trump tariffs have been oddly muted
Automotive News (2025) recently posted an unsigned editorial that drew upon the words of Ronald Reagan in 1987 to reiterate the trade journal’s opposition to Trump’s tariff-focused economic plans.
“We have been down this road far too many times, and our frustration with the Trump administration’s trade policies remains. Over the past eight years, we’ve written more than a dozen times about the damage that unnecessary trade wars do to this industry — the chaos that they cause in product planning, supplier sourcing, manufacturing operations, logistics and retailing. Even if the tariff threat ultimately proves to be merely a ploy to win concessions unrelated to trade, the potential collateral damage is not worth it.”
All true enough, but rather understated. Meanwhile, Peter DeLorenzo (2025) argued that Trump’s tactics “will wreck Detroit for months, if not years, to come.” Yet DeLorenzo seemed more interesting in attacking the “‘intelligentsia’ (cough, cough) in Washington” than in fully articulating why Trump’s actions were so reckless.
Ford CEO Jim Farley also appeared to sugar coat his criticism of the proposed tariffs. “President Trump has talked a lot about making our U.S. auto industry stronger, bringing more production here, more innovation to the U.S., and if this administration can achieve that it would be, I think, one of the most signature accomplishments,” he said at a conference last month. “So far what we’re seeing is a lot of cost and a lot of chaos” (Martinez, 2025).
Everybody should have known this would happen
These critiques could have articulated in greater depth the sheer recklessness of Trump’s actions. For example, by imposing the tariffs he is violating an agreement with Canada and Mexico that he negotiated when he was last president (Lynch et al., 2025). Going forward, why should these countries — longtime allies, no less — trust that a deal is a deal with the U.S.?
By the same token, if Trump’s goal is to bring more manufacturing back to the U.S., why does he think that immediately imposing onerous tariffs is the most efficient way to push the auto industry to adjust supply chains? After all, these supply chains have been in place for a significant amount of time. Those with Canada date back to an auto-focused pact in 1965 (Crane, 2006) and with Mexico to the North American Free Trade Agreement in 1994 (Wikipedia, 2025).
What I find most bemusing is that the auto industry and media had a full understanding of Trump’s bull-in-a-china-shop negotiating style and retrograde views on tariffs, where he has glorified the McKinley administration’s policies (Jeong, 2025). The auto industry’s chattering class apparently did not feel strongly enough about the return of 19th Century-style trade wars to loudly support Trump’s Democratic opponent.
Perhaps this reflects the same attitude that led dealers to express optimism about the Trump presidency. An Automotive News survey in January found that 64 percent of dealers expected the new administration to have a positive impact their business and only 17 percent expected a negative effect. This was despite 68 percent of respondents saying that Trump’s proposed tariffs would impact new-vehicle sales “negatively” or “extremely negatively” (Lutz, 2025).
It will be interesting to see whether next year’s survey results change much, particularly if Trump continues to ramp up his cherished trade wars.
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RE:SOURCES
- Automotive News; 2025. “In our opinion: Threats of trade wars, punishing tariffs are still self-defeating.” Posted Feb. 6.
- Crane David; 2006. “Canada-US Auto Pact.” The Canadian Encyclopedia. Posted Feb. 6.
- DeLorenzo, Peter; 2025. “Chaos in Washington threatens to destroy Detroit.” Auto Extremist. Posted March 2.
- Farmer, Brit McCandless; 2024. “The factors that led to Donald Trump’s victory.” CBS News. Posted Nov. 11.
- Jeong, Andrew; 2025. “Why Trump admires President McKinley, the original ‘tariff man.'” Washington Post. Posted Jan. 27.
- Jones, Callum; 2025. “Trump says ‘no room left’ for deal that avoids tariffs on Mexico and Canada.” The Guardian. Posted March 3.
- Lynch, David J. and Amand Coletta and Mary Beth Sheridan; 2025. “Tariffs for Mexico and Canada begin Tuesday, Trump confirms.” Washington Post. Posted March 3.
- Lutz, Hannah; 2025. “Dealers optimistic about EV pullback, business focus under Trump.” Automotive News. Posted Jan. 25.
- Martinez, Michael; 2025. “Trump creating ‘cost and chaos,’ Ford CEO Jim Farley says.” Automotive News. Posted Feb. 11.
- Smith, Connor; 2025. “Atlanta Fed’s GDPNow Estimate Falls Again.” Barron’s. Posted March 3.
- Wikipedia; 2025a. “North American Free Trade Agreement.” Page last edited Feb. 12.
- ——; 2025b. “Toyota RAV4.” Page last edited Feb. 25.
- ——; 2025c. “Chevrolet Silverado.” Page last edited Feb. 17.
How are all these tarrifs different than eg the big two oligopoly during 1950s-1970s?
Or even the Bush/ Obama 2008-09 GM bail out? I remember that in historical capitalism always exists the bankruptcy; or else my teachers at the business school were liars.
How’s the American automotive society/ sector been helped all the past century by the absence of competition?
The Japanese (a US protectorate by the way) stood back as well as the German automobile enterprises (another US ally/ protectorate) after the Plaza accord, despite their former success in US. Once a lacky, always a slave I would say, since at the critical economic sectors we always have political economy and not ceteris paribus plain what ifs.
Has ever US allowed to their enemies or even real competitors’ countries to establish factories or purchase local automakers? Even the french ally Renault escaped (why?) from US/ AMC.
More than half of the goods classified as automotive vehicles, parts and engines come from Canada and Mexico. Note that the tariffs won’t just apply to completed vehicles, but also parts — some of which cross the border multiple times. This will inevitably increase prices. Two studies estimate average price increases of $3,000 whereas another one projects that a full-size truck could cost over $10,000 more (go here for further information).
These are particularly problematic increases given that the average price of a new car has been nearing $50,000 and an increasing percentage of the public can’t afford to buy one (go here).
Keep in mind that costs could increase further as those nations targeted with tariffs retaliate. In addition, Trump may not be finished rolling out tariffs against other major auto exporters such as those in Europe and Asia.
I don’t know how to respond to your question of how tariffs are different from an oligopoly. I’m not a fan of lax anti-trust law enforcement (go here), but that strikes me as a different animal than reverting to a tariff-focused economy of the 19th Century.
Your ‘president’ has forever destroyed trade, trust and goodwill with Canada and Mexico. The lack of opposition or at the very least thoughtful critical response by American auto executives is head in the sand cowardice, lest they displease their stockholders.
The business community seemed to be so transfixed by the prospect of tax cuts and regulatory rollbacks that they dismissed the radical things Trump said he would do if elected. And make no mistake about it, reverting to mercantilism is a radical idea — particularly when Trump has also called for eliminating the income tax. Basically he wants to drag the United States back to the 19th Century — and longtime allies like Canada and Mexico along with us. Today I’ve seen a number of speeches by Canadian leaders and I am glad that they are pushing back hard.
If one is the C.E.O., C.F.O. or C.O.O. of an automotive manufacturer or component supplier, what can one say ? We have a chief executive who refuses to learn about history and to listen to those who disagree with his pre-conceived notions of a global economy. Many historians and economists believe that the Smoot-Hawley tariffs of 1929 were a significant factor in the Great Depression (along with an over-blown speculating in stock market). I wonder what will ultimately happen to Buick, which is so heavily rooted in China. Midwest-based university economists here in the heartland are predicting that the Trump tariffs will add $ 8,000.00 to $ 14,000.00 to the cost of a new car or truck, if the tariffs go into effect. Trump’s “flip-flops” on the tariffs cannot be good for the stock market, investors or the overall economy. I see dark days ahead for all but the wealthiest in the world .