The global automotive industry is facing ‘Armageddon’ thanks to the latest salvo in U.S. President Donald Trump’s trade war, says a leading industry analyst.
In a research report released Friday, Wedbush Securities managing director Daniel Ives said the 25 per cent tariff on auto imports to the U.S. will result in an almost-immediate increase of $5,000 to $15,000 in the price of a car for U.S. consumers.
Trump’s goal of luring auto manufacturers and parts companies back to the U.S. to create a purely American vehicle is nothing but a pipe dream, Ives added.
“A U.S. car with all U.S. parts made in the U.S. is a fictional tale not even possible today,” said Ives. “In our view it would take three years to move 10 per cent of the auto supply chain to the U.S. and cost hundreds of billions with much complexity and disruption.”
While the executive order signed by Trump Wednesday includes some provisions for pro-rating the tariff on imported cars made with some U.S. parts, Ives said there’s still a lack of clarity on how precisely that would work.
In its current form, said Ives, the auto tariff would result in $100 billion in additional annual costs to the car industry, which would be passed along to consumers.
“The concept of this auto tariff in our view would be a back breaker and Armageddon for the auto industry globally and throws the supply chain into pure panic mode,” said Ives.
Despite the apocalyptic language, the Wedbush report is a level-headed assessment of the situation facing the industry, especially the highly integrated North American supply chain, said Flavio Volpe, CEO of the Automotive Parts Manufacturers’ Association.
“This echoes a lot of the math that we’ve been doing,” said Volpe. “This report is a reminder that we’re very, very close to causing irreparable harm to this industry, for reasons that nobody really understands. It’s a screaming red light of a warning.”
Volpe has repeatedly said publicly that the entire North American automotive industry could grind to a halt within a week if it faces tariffs, a refrain echoed by Unifor national president Lana Payne.
After Trump announced the auto tariff Wednesday, Payne slammed the move, saying it risks putting thousands of people out of work on both sides of the border.
“President Trump fails to understand the chaos and damage this tariff will inflict on workers and consumers in both Canada and the United States,” Payne said.
According to industry estimates, there are roughly 125,000 people working for auto makers and parts suppliers across Canada.
Some components cross the border seven or eight times en route from raw material to finished vehicle, according to industry estimates.
There are also thousands of components in each vehicle.
Thursday, S&P Global Mobility automotive analyst Stephanie Brinley said in a report she expects persistent, high tariffs, even if there are some exceptions.
“Depending on the administration’s actions in the next few days, this seems to be the new baseline for automotive trade,” Brinley said.
Earlier this month, Brinley estimated that the imposition of tariffs would lead to a 20,000 vehicle per day production cut in the highly integrated North American auto industry, within a week of the tariffs coming into effect.
