Trade war 'black swan event' and 'a debacle of epic proportions' for carmakers

Importance Score: 85 / 100 🟢

Auto Industry Braces for Potential ‘Black Swan’ Tariff Impact

Analysts caution that recently enacted tariffs represent a ‘black swan event’ for the global auto industry, potentially triggering widespread turmoil and characterized by one leading expert as a “debacle of epic proportions.” The newly imposed levies, specifically targeting foreign-made vehicles, are anticipated to have significant repercussions across the sector.

‘Armageddon’ and ‘Pure Chaos’: Analyst Warns of Tariff Fallout

A 25 percent tariff suddenly applied to vehicles manufactured abroad and imported into the US could unleash “Armageddon” and “pure chaos” within the automotive sector, according to Dan Ives, a prominent analyst at US brokerage Wedbush. He predicts this measure would inflate vehicle prices by as much as $10,000 per car.

Ives emphasized that such a policy shift would send “the supply chain into pure panic mode,” potentially costing the car industry £75 billion annually. This substantial financial burden, he argues, would inevitably be transferred to consumers through increased prices.

UK Auto Industry Faces Setback

For the UK car industry, heavily reliant on exports, this news delivers a significant blow.

The United States stands as the second-largest export market for British automobiles, following the EU. In 2024, over 101,000 vehicles, primarily high-end models valued at £7.6 billion and constituting 16.9 percent of all car exports, were shipped to the US.

Industry Response and Concerns

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), expressed disappointment regarding the tariffs. He indicated that additional levies on vehicles produced in the UK were “likely,” adding further uncertainty to the sector.

Carmaker Stocks Decline

Shares in major car manufacturers experienced a downturn following the tariff announcement. Tesla, owned by Elon Musk, saw a 5.4 percent decrease in share value yesterday.

Volkswagen, parent company of Bentley, declined by 4.4 percent, while BMW, which owns Rolls-Royce, also experienced a 3.6 percent drop.

Manufacturers Evaluate Options

Automakers based in the UK are currently evaluating strategies to mitigate potential negative impacts. Concerns are mounting that manufacturers might reduce production across their British facilities to accommodate anticipated decreased demand, or diminish the volume of vehicles exported to the US.

The Institute for Public Policy Research estimates that approximately 25,000 jobs are at risk across UK factories, including major plants like JLR’s Jaguar and Land Rover sites in the Midlands, and BMW’s Mini plant in Oxford.

Immediate Impact on US Operations

The initial repercussions of the tariffs were felt swiftly, with Vauxhall-owner Stellantis announcing temporary layoffs for 900 employees across five US facilities.

Stellantis, which manufactures Chrysler and Jeep vehicles, is also halting production at assembly plants in Mexico and Canada, causing its shares to fall by 8.1 percent.

Trump’s Stated Objectives

US President Donald Trump has articulated his aim for these tariffs: to incentivize foreign companies to relocate their production to the United States, thereby circumventing the new levies.

However, Wedbush analyst Ives contends that relocating even a fraction of the auto supply chain to the US would be a protracted process, requiring three years to shift just 10 percent.

Furthermore, Ives argues that such a relocation would entail substantial costs, reaching hundreds of billions of dollars, and generate “much complexity and disruption” for the industry.

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