How tariffs will affect long-term automotive industry plans

Sean Tucker, the lead editor of Creative Development at Kelley Blue Book, is skeptical of the Trump administration’s recent tariffs.

“The fundamental problem with a president trying to do something through tariffs is that he has four years of presidency. Politics moves much faster than the fiscal sector of the automotive industry.”

The tariffs Tucker explains were introduced by the Trump administration in March as part of an attempt to bring manufacturing back to the US. According to Tucker, it may not be the best approach for an industry that often operates on a 10-year timeline.

The automotive industry plans extensively and adapts slowly

With new car models coming out every year, it may seem like the automotive industry is evolving rapidly. In fact, vehicles designed today may not hit dealers until 2035. New vehicles go through many stages before they hit the market. Research from cars and drivers shows that the process takes an average of 72 months and includes market research, design and engineering, manufacturing and product launches.

Production of new vehicles requires establishing supply lines, creating multi-billion dollar contracts, remodeling plants and retraining workers. Once enacted, these plans are difficult and highly altered.

“TakeFord. Ford already has a Ford F-150. They have already been contracted to where to produce that until 2028. At that point, they will introduce a new one and start a 2029 contract.” “What you don’t intend to do in the next four years can’t change that.”

Automakers such as Ford and Kia, which already have assembly plants in the US, are suitable for weather duties. However, unless you can source new and inexpensive parts, you will face high tariffs on imported parts. For now, they are swallowing up costs by offering consumer employee pricing and generous cashback transactions.

Some automakers are increasing domestic production, but it will take some time. General Motors has announced a $8888 million investment at its assembly plant in the suburbs of Buffalo in New York. This will be modified to create the next generation V8 engine. This is a two-year process and the future of the supply chain for building these factories can be destroyed as tariffs affect every part of the construction and manufacturing industry.

When will consumers raise car prices?

Most industry experts agree that car prices will rise due to tariffs, but no one is sure that consumers see those increases in lots. Price changes vary by manufacturer, inventory and model. For example, manufacturers like Toyota will need to import new vehicles faster if they operate with less stock in the country. This means that Toyota’s prices are likely to increase the prices of cars manufactured by companies like RAM, which have a large supply of domestic stocks.

Although tariffs apply at a fixed price, Tucker believes it is not as simple as a 25% tariff, which amounts to a 25% price increase for all vehicles.

“Automobile manufacturers can play certain games to protect certain buyers,” he explains. For example, the cheapest model Chevrolet sells is called the Trax. The starting MSRP is $20,400 and is subject to customs duties as it is imported from Korea. “If Chevy raises the price of the thing by 25%, no one is going to buy it.”

What Chevrolet can do is increase the price of Silverado. For example, it would be increased by a slim margin to offset the cost of TRAX. By spreading increased costs, automakers can help ease the impact of consumers. That may not be important – even if car loan rates have been around pretty stable since the beginning of the year, rising prices can make it even more difficult to qualify for the loan.

Discounts for domestic manufacturing have hardly been relaxed

In April, the White House announced discounts for automakers who use imported parts but assemble household vehicles. This discount will be in the form of a rebate, and manufacturers will need to apply for it by submitting a request to the Department of Commerce, detailing the number of vehicles and plants that use the parts.

“This is a fairly small refund, about 3 and a half in the first year, two and a half in the second year, and then disappearing.” In addition to being small, the rebates do not address the real issue of time. “The (automobile manufacturers) are visible in seven to ten years, so giving a one-year exception doesn’t make much difference for them as they plan models for 2030 and 2032.”

With the three years after this rebate option ends, automakers may be building and recalibrating factories as they gradually move production nations. They will also meet the contracts settled before the second Trump administration began.

Trump’s recent UK deal remains largely unchanged

The White House signed a contract with the UK in May, reducing import taxes on up to 100,000 British cars per year, increasing it from 27.5% to 10%. The transaction also removes 25% tariffs on the UK steel and aluminum quotas. Details of this article have not yet been finalized at the time of this article, including setting clear import quotas for steel and aluminum, and clarifying whether the quota includes derivatives of steel.

This was the first such deal the Trump administration has made since implementing his sudden global tariffs. The administration argued that the deal would provide US access to new trade opportunities for $5 billion worth of agriculture, chemicals and mechanical products, along with cheaper sources of steel and aluminum.

When asked about the contract, Tucker said the impact on the automotive industry would be “a fairly minimal. This is the exception of 100,000 cars, which is the number of things that we will import from the US from the UK in a year.” Additionally, the deal primarily applies to luxury cars such as Bentleys and Jaguars and ultra-luxurious cars.

To bring back more of how this trade deal won’t change things, Tucker recently wrote about his Honda plant in Greensburg, Indiana. This factory alone produces 250,000 cars a year, making it one of the most productive factories in the world. The reduction in 100,000 imported vehicles may seem big, but for vehicles already produced in the US, it’s ultimately a slight drop in buckets.

As for steel and aluminum, the US imported very little from the UK before the tariffs were enforced. According to UK Steel, the US imported 180,000 pounds of British steel in 2024. This shows that it accounts for a small number of steel imported into US data from the World Population Review.

Conclusion

The Trump administration is currently trying to use tariffs to bring manufacturing back to the US, which, in its short timeline, contradicts the long-term plan of the automotive industry. The recent discounts introduced by the Trump administration are unlikely to make a big difference to automakers, and neither is it a new trade deal with the UK or a high consumer vehicle price.

If you are waiting for the market, there are steps you can take to prepare yourself for your next car purchase. It may be a good time to refinance your car loan as lenders restrict access to new and used car credits. You can also consider pre-approval of your car loan so you can see how much your budget can handle, regardless of the impact of your fees.