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Tariffs

Trump's Tariff Roulette: A Recipe for Economic Disaster in the US Auto Industry

Strategic Insights

— 2 min read

The administration's random and often arbitrary tariff policy under President Donald Trump is creating uncertainty that makes it difficult for companies to plan for the future and invest in long-term projects. This is particularly concerning for the auto industry, where companies need predictability to build factories and make investments that will be repaid over several years. Meanwhile, the Biden administration's policies have led to an unprecedented boom in factory construction, with real spending on factory construction in 2024 being more than twice as high as it was in 2019.

Key Takeaways:

  • Trump's tariff policy is creating uncertainty for companies, making it difficult for them to plan and invest in long-term projects, particularly in the auto industry.
  • In the first term, factory construction fell under Trump, with 2019 levels being more than 10% below those in 2016.
  • Trump's tariffs on steel and aluminum are making inputs into manufacturing more expensive, as more than half of imported goods are inputs for US firms and factories.
  • China is already producing high-quality electric vehicles (EVs) that sell for less than $10,000, with the cost of EVs expected to decrease and performance to improve in the near future.
  • The rest of the world is rapidly moving forward in building better and cheaper cars, and specifically EVs, which will make it challenging for US automakers to compete.
  • Trump's protectionism is likely to be short-lived, as foreign cars that cost one-third to half as much as US-made cars will be an attractive option for many consumers.
  • The executives making investment decisions in the auto industry understand that Trump's policy is not sustainable and will likely lead to a decline in US auto manufacturing.

Statistics:

  • Real spending on factory construction in 2024 was more than twice as high as it was in 2019 (B)
  • Factory construction fell under Trump in his first term, with 2019 levels being more than 10% below those in 2016.
  • More than half of the goods we import are inputs into manufacturing, either parts or raw materials.
  • The cost of electric vehicles in China is expected to decrease and performance is expected to improve in the near future, making them a competitive option for consumers.
  • Trump's tariffs on steel and aluminum are making inputs into manufacturing more expensive, as steel and aluminum are inputs for automakers.

Sources:

(A) https://www.aei.org/carpe-diem/nearly-all-imports-even-consumer-goods-are-inputs-for-us-firms-and-factories/

(B) Source missing due to lack of specification in the original text

(C) https://www.whitehouse.gov/fact-sheets/2025/06/fact-sheet-president-donald-j-trump-increases-section-232-tariffs-on-steel-and-aluminum/

(D) https://www.supplychaindive.com/news/trump-increase-steel-aluminum-tariff-nippon-us-steel-pennsylvania/749485/

(E) https://electrek.co/2025/04/08/byds-low-cost-seagull-ev-now-starts-under-8000-china/

(F) https://www.forbes.com/sites/jenniferdungs/2022/08/18/1000-miles-per-charge--whats-under-the-hood-of-the-longest-range-electric-cars/

(G) https://insideevs.com/news/758625/byd-megawatt-charging-demo-china/

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