For about six weeks, from September to October 2023, the United Auto Workers union (UAW) wreaked havoc on the U.S. domestic car industry.
Workers representing each of the “Big Three” Detroit automakers went on strike, demanding more livable wages and other labor benefits in their contracts.
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Ultimately, the strike proved successful, resulting in a new contract that increased wages and benefits for workers represented by the union, as well as increased wages and added benefits to autoworkers in some nonunion plants of foreign automakers like Honda.
Although the U.S. auto industry faced a big bill from the fallout following the prolonged UAW strike, new research shows that proposed tariffs pose a more significant threat to the industry than any strike could.
Tariffs more damaging than strikes, analysis says
According to a report by The Detroit Free Press, an analysis by the Michigan-based Anderson Economic Group shows that the risk of punitive trade policies causes much more consequential damage in the long run than any work stoppage can do.
Patrick Anderson, the CEO of the Anderson Economic Group, noted in a webcast that tariffs would impose noticeably huge costs on American automakers, erasing any ounce of competitiveness.
“This is why Jim Farley said tariffs could blow a hole in the U.S. auto industry,” Anderson said. “You cannot absorb those costs and continue producing the same products profitably.”
Anderson was referring to Ford’s CEO (F) , who rang the alarm for the industry in recent remarks.
On February 11, Farley appeared at the Wolfe Research Auto, Auto Tech, and Semiconductor Conference and discussed the consequences of the President’s proposed tariffs.
“So far, what we’re seeing is a lot of cost and a lot of chaos,” he said. “If you look at the tariffs, let’s be real honest, long term, a 25% tariff across the Mexico and Canadian border will blow a hole in the U.S. industry that we have never seen.”
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In addition to the 25% tariffs on steel and aluminum imports, the Trump administration is weighing a 25% tariff on foreign-built vehicles and parts that could take effect as soon as April 2.
In their analysis, the Anderson Economic Group examined the foreign-made content in vehicles, the effects of layered tariffs (25% on Canadian and Mexican imports, 10% on Chinese parts on top of existing 25% tariffs), and the broader impact on vehicle affordability.
They found that the implementation could result in a full-blown crisis. They project that new vehicle costs could jump anywhere between $1,000 and $9,000 per unit. Anderson’s latest analysis states that the upper end of the range is likely.
“For a full-size SUV with significant Mexican content, the added cost is nearly $9,000,” Anderson stated. “And if manufacturers fail to adjust production or shutter assembly lines, that figure could exceed $10,000.”
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Implications for Detroit
Detroit’s Big Three is already anticipating the impact.
Last week, Ford delayed the launch of its next-generation F-150, while Stellantis (STLA) has postponed Jeep Compass production in Brampton, Ontario. The plant, which formerly employed 3,000 workers, was expected to produce both electric and gas-powered cars.
“As we navigate today’s dynamic environment, Stellantis continues to reassess its product strategy in North America to ensure it is offering customers a range of vehicles with flexible powertrain options to best meet their needs,” a Stellantis spokesperson told the Detroit Free Press.
“As a result, the company is temporarily pausing work on the next generation Jeep Compass, including activities at the Brampton Assembly Plant.”
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