Trump's Tariff War Threatens North American Automotive Industry, Car Sales Could Drop Millions Of Units

Photo illustration. (Doc. Pexels/Henk Mohabier)

JAKARTA The wave of uncertainty has hit the North American automotive industry again. The 25 percent car import rate policy implemented by the Trump administration has the potential to have a very significant impact on vehicle sales in the United States and Canada.

A report from Reuters revealed that this policy could lead to a decline in annual car sales of up to two million units by 2025.

Launching from Car and Driver, Tuesday, April 22, based on data compiled by Reuters from the Detroit-based automotive advisory company Telemetry showed an alarming projection. If this 25 percent car import rate continues to apply until 2035, annual passenger car sales in the US and Canada are expected to shrink drastically to seven million units compared to projections without a trade war. In comparison, in a scenario without trade conflicts, car sales in the region are predicted to reach 24.6 million units.

Although the Trump administration had given a pause on the plan to apply reciprocal rates, this 25 percent automotive import rate is still valid. The increase in car prices due to this tariff is predicted to make many potential consumers rethink changing their old cars. Reuters estimates that saving consumer budgets in the US and Canada as a result of this tariff could lead to an annual car sales decline of 1.8 million units this year alone.

The impact of this tariff policy has also begun to be felt even though it has only been less than a month. Several automakers are reported to have stopped or postponed the delivery of vehicles at the port. Meanwhile, several other manufacturers are actually increasing the production of cars assembled in the United States while stopping imported model production.

Producer reactions to price fluctuations also vary. Ford, for example, offers employee discounts to everyone until next June 2. Meanwhile, Hyundai announced it would not raise prices for the time being, even though it also eliminates free care programs.

With this condition, the used car market is predicted to experience a surge in demand. This has the potential to create pressure similar to the scarcity that occurred during the COVID-19 pandemic. If demand for used cars increases, the price is likely to rise, following the upward trend in new car prices affected by tariffs.

The threat of reducing car sales to millions of units is certainly a serious concern for all automotive industry players in North America. The prolonged tariff policy not only harms consumers at more expensive car prices, but can also hinder overall industrial growth and potentially reduce jobs.