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Home Business & Finance

Fact Check: Tariffs will help the car industry todayheadline

March 6, 2025
in Business & Finance
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Fact Check: Tariffs will help the car industry
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On the evening of March 4, President Trump made his first address to a joint session of Congress since returning to power, treating it as an opportunity to rattle off a long list of accomplishments during his first 43 days in office.

In between the extended pauses for applause, the President touched on a number of topics, including national security, cultural and social issues, and the economy, with a special focus on tariffs. 

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Following the recently implemented tariffs on Mexican and Canadian imports, the “superstitious” President Trump announced that he would impose reciprocal tariffs on other countries, claiming that “countless other nations charge us tremendously higher tariffs than we charge them.”

“[…] we’re going to do it in April. I’m a very superstitious person,” Trump said. “April 2, reciprocal tariffs kick in, and whatever they tariff us, other countries, we will tariff them. That’s reciprocal, back and forth. Whatever they tax us, we will tax them.”

US Vice President JD Vance and Speaker of the House Mike Johnson (R-LA) applaud as US President Donald Trump speaks during an address to a joint session of Congress in the House Chamber of the US Capitol in Washington, DC, on March 4, 2025. 

WIN MCNAMEE/Getty Images

Trump made a bold claim about the auto industry during his administration

During the middle of his 1 hour and 40-minute speech, the President made a bold claim about the American auto industry. He declared that “we’re gonna have growth in the auto industry like nobody’s ever seen,” adding “that [auto] plants are opening up all over the place” and “deals are being made.”

“That’s a combination of the election win and tariffs. It’s a beautiful word, isn’t it? That, along with our other policies, will allow our auto industry to absolutely boom. It’s going to boom. Spoke to the majors today, all three, the top people, and they’re so excited,” Trump said. 

The White House Press Secretary confirms that a one month exemption to the 25% tariff on Canada and Mexico has been put in place for autos, at the request of the big three automakers who talked with Trump last night #cdnpoli pic.twitter.com/ghLXhAj9Sl

— Mackenzie Gray (@Gray_Mackenzie) March 5, 2025

As a result of the talks, White House Press Secretary Karoline Leavitt said at a press briefing on March 5 that President Donald Trump will grant a one-month exemption for vehicles covered by the United States-Mexico-Canada Agreement (USMCA).

“We spoke with the [Detroit] Big Three auto dealers, we will going to give a one-month on any autos coming through USMCA. Reciprocal tariffs will still go into effect on April 2nd, but at the request of the companies associated with the USMCA, the president is giving them an exemption so they are not at an economic disadvantage,” the press secretary said.

Leavitt added that the president told the respective auto CEOs “to start investing, start moving—shift production here to the United States of America, where they will pay no tariff.”

Related: Here’s how Trump’s tariffs will crash the American car industry

Experts sounded the alarm about tariffs’ effect on U.S. car industry

According to data compiled by Bank of America Global Research, American automobile manufacturing is one of the industries that can be hurt by U.S. tariff policy, as 24% of the revenue in auto, electrical equipment, and appliance manufacturing comes from imports. 

Additionally, an Anderson Economic Group analysis found that the risk of tariffs and other punitive trade policies can cause more damage to the U.S. auto industry in the long run than Union-organized work stoppages. With new tariffs, AEG projects that the cost of a new car could jump anywhere between $1,000 and $9,000 and that the upper end of the range is very 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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In addition, Barclays senior equity research analyst Dan Levy warned in a March 4 investor note that tariffs’ effects are “underappreciated.”

“While it’s generally understood that a blanket 25 percent tariff on any vehicles or content from Mexico or Canada could be disruptive, it may be underappreciated how disruptive this could be,” Levy wrote. “In short, without any adjustment from OEMs (i.e., no price increase, no adjustment in production plans), we estimate it could wipe out effectively all profits for the [Detroit Big Three].”

Last year, General Motors  (GM)  made $6 billion, Ford F took in $5.9 billion, and Stellantis STLA took in  $5.7 billion, all of which could fizzle, according to Levy. 

“We would expect automakers with mixed production footprints (such as [Detroit’s Big Three]) to reduce Canada/Mexico production for now, instead [of] relying on their US footprint to the extent possible,” Levy noted.

Related: Honda makes major move to sidestep tariffs

Trump also took credit for Honda’s tariff sidestep.

In addition to the claims about the tariffs’ benefit on the auto industry, he used a recent move by Honda  (HMC)  as an example of such “benefits.” 

“In fact, already, numerous car companies have announced that they will be building massive automobile plants in America, with Honda just announcing a new plant in Indiana, one of the largest anywhere in the world,” Trump said.

On March 4, Reuters reported that Honda will make its next iteration of the Civic hybrid in Indiana instead of Mexico to protect it from planned U.S. tariffs on imports.

According to Honda insiders who spoke to Reuters, the automaker planned to make the new one in Guanajuato, Mexico, beginning in November 2027 due to rising costs in Indiana and Canada. However, it reneged due to the tariff threat. Honda’s plant in Greensburg, Indiana, currently produces Civics and CR-Vs, which are also supplemented with output from its Alliston, Ontario plant in Canada.

Chief Operating Officer Shinji Aoyama said during Honda’s earnings call on February 13 that a 25% tariff on its Mexican and Canadian-made cars would have a “$20 billion-plus impact,” but noted that it can make short-term changes. 

“So at this moment, what we can do is to do something in the short term, which is about current production based on the current model mix and production in Mexico and Canadian factories,” he said. “We could reorganize the mix, product mix of the production as well there. This is something we can do short term. But in a mid-term perspective, we could change the allocation of the multiple mix in different ways. We are preparing for that, too.”

Related: Veteran fund manager unveils eye-popping S&P 500 forecast

Tags: carcheckfactindustryTariffstodayheadline
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