New reports claim that President Donald Trump threatened automakers not to increase prices even after tariffs go into effect. This reportedly happened in a call with auto industry executives earlier this month. The President has announced a 25% tariff on auto imports set to go into effect on April 3.
Automakers aren’t pleased by the call with President Trump and worry they will face backlash if they increase prices in response to tariffs. One executive, who remained anonymous, told The Wall Street Journal, “The math would tell you, that’s going to cost us multibillions of dollars. So who pays for that?”
The President is enacting tariffs with the goal of bringing manufacturing back to the U.S. These tariffs incentivize automakers to produce parts in America instead of overseas. However, it could take years for them to open new factories capable of doing so. Until then, tariffs would weigh on their businesses and likely force price increases.
How Can Trump Retaliate Against Price Increases?
According to insider sources, President Trump didn’t go into detail about the trouble carmakers will face if they increase prices. Even so, he has a few options available to retaliate against the industry. That includes wielding the power of regulators, who can make business more difficult for automakers that increase prices.
The President also argued that automakers should be pleased that he ended the Biden administration’s push for electric vehicles (EVs). This removed benefits and subsidies for companies that advanced EV creation as the previous administration pushed to phase out combustion engines.
What Does This Mean for Auto Stocks?
Even with the threat of retaliation, automakers will likely increase prices in response to tariffs. Investors who want to bet on the industry will keep an eye on Ford (F), General Motors (GM), and Stellantis (STLA). Of these three, GM has the best consensus rating at Moderate Buy and a $62.80 average price target, with the highest upside potential at 33.05%.
