Trump says his new tariffs on imported vehicles are 'vital to protect America’s automobile industry’ — but one lawmaker worries his approach has been akin to hacking with a ‘meat ax’

How will Michigan auto makers be affected by new tariffs?

According to the Detroit Regional Chamber, Michigan is the “auto capital of the world.” A total of 21% of all U.S. auto production happened in Michigan in 2022, and 98 of the top 100 U.S. carmakers have a presence in the Great Lakes State, while 65% are headquartered there. Around 20% of the Michigan workforce is also employed by the auto industry, which amounts to 1.1 million jobs.

Despite these impressive numbers, this is a marked decline from the role the auto industry used to play in Michigan's economy CNN reports. There's been a 35% reduction in jobs in Michigan auto plants since 1990, and the number of auto industry jobs has been cut roughly in half since that time.

Trump is hoping the new tariffs could bring some of these jobs back, and there are others who believe he could be on the right track.

Democratic Representative Debbie Dingell, who represents Michigan's 12th Congressional District, said: “I am somebody that believes tariffs are a tool in the toolbox,” and while she hopes the president’s actions could help restore jobs in her state, she also expressed concern that his administration’s actions may have gone too far, comparing it to a “meat ax.”

The United Auto Workers also called the tariffs a “victory for autoworkers,” and “the beginning of the end of … the free trade disaster,” and released a statement saying: “With these tariffs, thousands of good-paying blue collar auto jobs could be brought back to working-class communities across the United States within a matter of months, simply by adding additional shifts or lines in a number of underutilized auto plants."

However, those opposed to the tariffs argue that it takes time to build factories and change supply chains, so new jobs won’t be created right away. Instead, they say the immediate effect will be lost jobs. They may have a point, as around 900 workers of a Michigan auto parts factory that exports to Canadian and Mexican plants have already been laid off.

Additional layoffs could follow as a result of higher costs of importing parts that go into Michigan-made cars, as well as because of reciprocal tariffs other countries may put on U.S.-made autos and auto parts in response to the president’s new tariffs.

“The increased costs would cause significant disruption throughout the supply chain and, perhaps most importantly, lead to significant price increases to the cost to American consumers for vehicles,” according to a letter from Detroit Regional Chamber and MichAuto, an automotive and mobility association shared by Reuters.

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How will the car market as a whole be impacted?

It’s not just autoworkers in Michigan who are likely to be impacted by the president’s actions.

Around half of all vehicles purchased in the U.S. in 2024 were imported, and even many cars made in America had only 40% to 50% domestically-made parts. As a result, just 25% of all cars sold here can actually be considered to be “made in America,” according to the White House.

Unfortunately, imposing a 25% tariff on cars and car parts could make all the rest of those cars much more expensive. In fact, Dan Ives, of Wedbush Securities, a Wall Street firm, shared he estimates that the average price of cars is expected to increase between $5,000 and $15,000. As new car prices surge, this will increase demand for used cars, driving up prices for these vehicles as well.

Some people are rushing to purchase new or used vehicles before the full effects of the tariff hit and prices go up. If you’re already in the market and have the money, this may not be a bad idea.

For those who may need a car in the coming months or years but aren’t ready to pull the trigger yet, it’ll be important to find other ways to keep costs down, including downgrading and buying a cheaper vehicle than you might have hoped, sticking to used cars, and arming yourself with the information you need to negotiate effectively on price — such as the latest blue book valuations of vehicles you're considering.

Unfortunately, with car prices climbing, there may also be more pressure to take out larger auto loans and auto loans with longer terms. Resist this temptation if you can, as auto loan balances have already hit record highs — as have defaults — and borrowing too much for a car could harm your other financial goals.