Trump’s tariffs: Look for the union label

One of the biggest boosters of President Trump’s tariffs has been the United Auto Workers (UAW). The venerable union wants to see domestic factories expanded because that will empower them. It likely won’t be good for the industry or even the UAW’s own members, not to mention other manufacturing workers, car buyers, or the broader public.

Trump has enacted 25 percent tariffs on all vehicle imports. While the president has paused other tariffs, the auto ones are still in place. The president has, however, indicated he may pause them too to give the industry time to adjust.

UAW’s support for tariffs is very much in line with Trump’s thinking. UAW President Shawn Fain argues that US manufacturing can be revived if it becomes too expensive for companies to move production to other countries.

“We can and should reshore tens of thousands of jobs in very short order, which would raise the standard for all workers. Strategic tariffs can play a role in that,” Fain said in a recent livestream to union members. He applauded the Trump administration for “stepping up to end the free trade disaster.”

Tariffs don’t make anything cheaper, faster, or more efficient. They do the opposite. They add additional artificial costs in the hopes that it will force producers and consumers to seek out alternatives. Companies outsource and offshore in first place because that is cheaper than doing it domestically. Trump’s tariffs don’t reduce the cost of domestic production, they simply make offshoring and outsourcing even more expensive. Fain concedes this, but argues that the industry can afford the higher prices.

“As they shift their supply chains and investments to the US, auto companies that have enjoyed years of record profits should absorb the cost of these tariffs rather than passing them on to consumers, and the UAW would support legislative or regulatory action requiring them to do so,” Fain warned. Unionized Michigan workers make as much as ten times what Mexican factory workers make.

The Trump administration has tried to add a carrot-and-stick approach to this by giving automakers a break on the tariffs if the imported vehicles had American-made parts. If, for example, a car was assembled in a plant in Mexico, but that plant used at least some American-made parts during the car’s assemblage, then that would be taken into account when calculating the tariffs. The higher the percentage of parts, the better the reduction when the vehicle crossed the border.

The wrinkle there was that the administration has yet to figure out a clear way to identify US-made components. Nor has the administration said how much of a reduction automakers would get. Presumably it would work on a sliding scale, but manufacturers so far have no guide. So, for now, the tariffs are in full effect, undermining the administration’s own carrot-and-stick approach.

The tariffs may bring some production back to the US, but the cost would be steep. A Wall Street Journal story noted that a company named Luxit was planning to move a ten-man production line from China to Tennessee due to the tariffs, but this would only result in a net gain of just two US jobs. The rest of the work would be automated. This may not boost the UAW membership much because Tennessee is a right-to-work state, so those two workers would not be forced to join the union. Luxit is also considering moving a production line back to Michigan, which would net 10 jobs.

Meanwhile, Stellantis laid off 900 workers in Michigan and Indiana factories that sent parts to facilities in Mexico and Canada after the tariffs went into effect.

Trump’s other tariffs on steel and aluminum, though currently on hold, could disrupt things further because they would cover materials used in making vehicles. University of Michigan economist Gabriel Ehrlich told WSJ they could cost Michigan 2,300 jobs by the end of 2026 – 600 at car plants and another 1,700 jobs in related industries.

The Andersen Economic Group estimates that the auto tariffs would increase the sticker price of a Honda Civic and Volkswagen Jetta by between $2,500 to $4,500 and boost the prices of a Chevrolet Suburban, GMC Yukon, and Cadillac Escalade by $10,000-$12,000. That sticker shock will surely depress sales, causing buyers to hold off on trading in their old cars for a new one.

That’s assuming the industry dares to pass those costs along. Trump has threatened to retaliate against companies that raise prices to offset the increased costs from tariffs. Like Fain, Trump appears to believe that the industry can simply accept being less profitable and stay in business without a hitch. Unlike Fain, however, Trump has not endorsed price controls. Yet.

This is a formula for wrecking the auto industry as a whole. Trump and Fain believe in a vision of restoring the US auto industry to way it was 1950s. Pretty soon the past may be the only place that the industry exists.