In 2025, President Donald Trump reignited his aggressive trade policy with promises of an American manufacturing revival. But for the US auto industry, that vision is turning into a multibillion-dollar burden.
The so-called Big Three — Ford, General Motors, and Stellantis — now estimate a combined $7 billion loss due to tariffs this year. That includes $3.5 billion for GM, $2 billion for Ford, and $1.5 billion for Stellantis. Even Tesla, often seen as a maverick in the industry, reported $300 million in tariff-related costs in Q2 alone.
At the heart of the disruption is Trump’s sweeping 72.5% tariff on Chinese-made car parts brought into the US via Mexico. For small and mid-sized suppliers like Detroit Axle, the results were nearly catastrophic. “Our tariff costs rose from $700,000 to $7 million per month — overnight,” said CEO Mike Musheinesh. His family-run business was forced to sue the federal government just to stay afloat.
Despite Trump’s promise of a “golden age” for American carmakers, the opposite seems to be unfolding. In fact, Ford reported a net loss in Q2, citing an $800 million tariff hit. CEO Jim Farley called Ford “the most American company with a $2 billion liability.”
Trade Deal Chaos
The complexity of the new tariff regime lies in its uneven treatment of trading partners. Trump inked new deals with the EU, Japan, and South Korea, bringing their vehicle tariffs down to 15%. In contrast, Canada and Mexico — America’s largest automotive trade partners — face 27.5% tariffs due to stalled renegotiations of the USMCA agreement.
Stellantis CEO Antonio Filosa highlighted the irony: 4 million of the 16 million vehicles sold in the US annually are built in Mexico and Canada, often with substantial American content. Yet cars from Asia and Europe, with “virtually zero US content,” are now at a tariff advantage.
Some partial relief exists. US-assembled vehicles can receive rebates of up to 3.75% of retail value, and compliant components under USMCA rules are exempt from some levies. But this is cold comfort for a sector still digesting 50% tariffs on steel, aluminum, and copper — costs largely passed down from suppliers to manufacturers.
The Real Impact: Consumers and Competitiveness
Despite the pressure, carmakers have been cautious about raising sticker prices. So far in 2025, the average vehicle price rose just 1.2% year-over-year in June, well below the 10-year average of 3.9%, according to Kelley Blue Book. But industry analysts warn that stealth increases — higher financing costs, reduced discounts — are already affecting consumers.
Forecasts from Cox Automotive expect 4–8% price hikes by year-end, especially as new model launches in September provide an opportunity to adjust pricing structures. “That pause will have an end,” said S&P’s Stephanie Brinley. “Eventually, automakers will need to pass the costs on.”
Even established players like BMW, which builds many vehicles in South Carolina, are grappling with the regime. Though US-assembled, their operations are not fully compliant with USMCA, exposing them to higher tariffs on parts from Mexico and Canada. Conversely, GM benefits from Trump’s South Korea deal, as 17% of its US sales come from Korean plants.
What Comes Next?
To mitigate the long-term damage, reshoring has become a strategy. GM announced a $4 billion investment in US factories to shift capacity from Mexico, hoping to add 300,000 units of output. Still, the transition will take time, and the immediate pain remains acute.
Ironically, Detroit Axle — once on the brink of collapse — has seen a 20% sales surge. As weaker rivals exited the market, demand rebounded despite higher prices. Yet even Musheinesh admits the profit margin is down 80%. “American consumers are the ones paying in the end,” he said.
As Trump doubles down on tariffs, the promise of American industrial dominance is giving way to a complex reality: Protectionism may protect no one — and cost everyone.