Trump Warns Automakers: "Don't Raise Prices"

During a recent call with the CEOs of major automakers operating in America, President Trump cautioned executives against raising vehicle prices in response to the tariffs. He emphasized that the tariffs aim to bolster domestic manufacturing and reduce reliance on foreign production and made it known that any price hikes in response to new tariffs would be viewed unfavorably by the White House.

The administration's sweeping 25% tariff on all imported vehicles and parts will go into effect later this week. “You’re going to see prices going down,” Trump said at a public event, insisting that the tariffs will bring production back to the U.S. and ultimately benefit the consumer. However, with lead times to bring a new factory online stretching longer than a presidential term, automakers and suppliers see things differently.

According to the Wall Street Journal, executives reportedly left the call concerned about potential retaliation if they passed increased costs onto customers. But for most automakers, it's simple math: a 25% tariff will be impossible to absorb without raising prices. For example, Chevrolet enjoys a roughly 25% margin on C8 Corvettes; well, there goes all the profit from a key profit center—the equation gets even worse when you start looking at volume models which top out around 7% for high performers.

Analysts at Morgan Stanley estimate new vehicle prices could rise by 11% to 12% as early as May, once dealer inventories start to dwindle.

Trump, for his part, argues the tariffs are justified by the removal of what he called “President Biden’s electric-vehicle mandate.” He claims the industry will benefit from a shift away from EV subsidies and emissions standards and instead see new opportunities under his administration’s manufacturing-first agenda.

Automakers, however, have voiced concern that they’re being asked to absorb billions in new costs while being told not to pass them along. Stellantis, for example, warned dealers that tariffs on vehicles from Canada and Mexico could put American brands at a disadvantage and is encouraging dealer principals to contact local and state lawmakers to begin making noise.

Some dealers are stockpiling vehicle inventory, while some automakers are pulling forward production to help stave off the impending doom and soften the near-term impact. Everyone is expecting cost increases to rip through the market soon.

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