Your new car may cost thousands thanks to the Trump tariff for cars – and GM and Ford may lose billions, as the analyst warns

President Donald Trump’s tax is likely to increase by 25 % over imported cars, light trucks and car parts while many Americans are already struggling to provide a new set of wheels. The customs tariff will also force car companies to rethink the cars they are doing and where they make.

Trump has been hated to impose taxes on foreign cars for years. During his first term, car imports announced a threat to national security, which gave him the authority to impose a tariff on them. On Wednesday, fees are submitted and imposed. It applies midnight April 3.

He is the latest in a number of car industry maneuvers by Trump during his first weeks at the White House. Car companies also transportReverse the criteria for economics in fuel consumptionto requestWarmical gas emissions standards belowandA group of operations to retreat from the policy of electric vehicles.

Some details of the automatic definitions of Trump have not yet been resolved.

For example, it is not clear whether the new car tariff will accumulate above 25 % of the import taxes that will be imposed next week on all goods from Canada and Mexico. This means that cars from Canada and Mexico can face a 50 % new tariff.

Currently, the Trump administration has disrupted definitions, light trucks and car parts that qualify for the transactions exempt from customs duties under the United States, Mexico and Kanaada agreement, a regional trade agreement that the President negotiated five years ago. Trump intends to narrow this exemption for the content provided in the United States, not Canada or Mexico. But this will require the creation of operations to determine what is qualified by the United States-which may take weeks or months.

The White House also said that the import tax will apply to the “main” car parts, including engines, transportation, power generation and electrical components. Definitions can be expanded to other car parts “if necessary”.

Here is what to know:

Why are the definitions very difficult for the auto industry?

With the expansion of car manufacturers worldwide, they created complex and effective supply chains that spanned the two countries. In North America, for example, Mexico is provided with low wage workers, manufactures of smaller and lowest cars and trucks while Canada and the United States provide more skilled workers and technological know -how.

Trump’s tariff aims to re -manufacture cars to the United States. But it will not be easy.

The sources of thousands of parts that are imported to the United States and the uprooting assembly operations will take place for years.

“It adds to the uncertainty that faces all automobile companies, as the supply chain in the industry is universal by nature and has improved around the moving components across the national border where free trade agreements were present in the past,” said John Paul McDovovy, a professor of management at the University of Pennsylvania.

Sam Fiorni, an analyst at AutoforeCast Solutions, notes that while luxury car makers and their buyers can bear some price adjustments, “They are companies like Toyota, Mazda and Sobarro who import the large percentage of their fleet that will take the beating.”

He added: “Dctios of customs duties on parts of vehicles built in Mexico and Canada that are not obtained from the United States will harm General Motors, Stelins, and Ford over the next few circles, cost them billions.”

Trump’s tariff – which is permanently insists – will force companies to make difficult choices.

“It will have an impact on forcing companies to increase the American content” if they want to avoid import taxes, “said Richard Mukika, a commercial lawyer with Miller and Shafaleh.

Although Vanessa Miller, head of the auto team at the Foley & Lardner, admits that some companies will be able to the axis of operations for the United States, others are linked to factories in Mexico or anywhere else to take this step any time soon.

Car industry companies may have to stop making some vehicles because they will not be profitable with the definitions in force. “I have struck the definitions” everyone in a way that makes them rethink everything. “This is at least three or four years at least. We are not looking at something you can only ride.”

What does this mean for car buyers and new car prices?

Potea Karani and Andrew Furan estimates TD economics that the customs tariff can raise the average price of cars and light trucks in the United States – which total more than $ 47,000 last month – up to $ 5,000 if car manufacturers are transported along the cost to the entire consumers. This rise in prices may rise – up to $ 10,000 – if the Trump administration applies the full tax to Mexico and Canada.

Car manufacturers and their suppliers are now recovery nowYears of instabilityIt was brought before the intercession production stopped, aLack of semiconductorsInventory has decreased on many agents. This meansThe prices were high, the incentives were low and a few deals were.

During the peak of the epidemic, consumers still buy vehicles at high prices. But the stacked definitions can put new cars far from the reach of many potential buyers, especially given the increasing indicators of possibleThe broader inflation throughout the economy.

“Begin almost immediately, consumers will see that their new cars are already expensive to cost hundreds of thousands, and these prices will escalate more when the supply of many major vehicles diminis.” “Imagine the rise in the price during a lack of semiconductor and extend it through each brand and manufacturer. The flowing effect will lead to the removal of young suppliers from work and sends many workers to unemployment.”

What about used cars?

By raising the prices of new vehicles, the tariffs are likely to send to the market used. But with the limited inventory used, buyers flow the rock of used car prices as well. They are already an average of $ 25,000.

The average penetration of the lease contract, or the number of vehicle transactions that are rent, is about 30 % or so over the past ten years, according to Edmunds data.

However, the industry has witnessed low rental rates-nearly half of the standard-especially between May 2022 and January 2023. Less number of leased vehicles usually mean a fewer number of two or three-year-old vehicles in the used car market.

So there is likely to be a shortage of used cars as more buyers begin to shop for them.

How did the industry respond?

The ruler Matt Blant, head of the US Automobile Policy Council, which represents American automotive companies, said that manufacturers supported Trump’s efforts to enhance the manufacture of local cars. But he warned that “it is important to implement the customs tariff in a way that avoids raising prices for consumers, which maintains the competitiveness of the auto sector in North America.

The Labor Union praised the car’s workers in definitions. “End the race to the bottom in the automotive industry, it begins to fix our broken commercial deals, and the Trump administration has made history with today’s actions,” the UAW president, Sean Fine, said in a statement. “These definitions are a major step in the right direction of car and communities with blue collar throughout the country, and they are now on automobile companies, from the three adults to Volkswagen and abroad, to restore good union jobs to the United States.”

But Jennifer Savavian, President and CEO of Autos Drive America, which represents international cars manufacturers, denounced definitions: “The definitions imposed today will make them more expensive to produce and sell cars in the United States, ultimately leading to high prices, lower options for consumers, and less than manufacturing functions in the United States.”

This story was originally shown on Fortune.com