Foreign automakers’ threat to exit US market illustrates Trump tariff consequences

Foreign automakers are reportedly threatening to pull their most affordable models out of the US market if terms of the US-Mexico-Canada Agreement aren’t renewed. The situation exemplifies an industry-specific problem with Trump tariffs, says CEI Senior Economist Ryan Young:

“Usually when people say tariffs hurt affordability, they just mean that tariffs raise prices. But in the auto industry, tariffs might drive the most affordable cars out of the market altogether. This is bad news both for low-income drivers and younger people saving up for their first cars. The average car price in the US is now about $50,000.

“Trump’s USMCA trade agreement, as well as his subsequent auto tariffs that likely violate that agreement, make life more difficult for automakers because many affordable cars on the market are imported, such as the Korean-made Hyundai Venue, or use too many foreign parts to avoid tariffs, such as the Honda Civic.

“Later this year, Trump may decide to alter or abolish USMCA, creating even more uncertainty. Automakers may have no choice but to ditch affordable imported cars altogether and focus on more profitable, higher priced trucks and SUVs.”