According to Refinitiv, as the Trump administration is about to impose a 25% tariff on imported cars, the US automotive market is facing its most severe price test since the pandemic supply chain crisis. This tariff storm may not only repeat the history of car prices soaring by 20% during the pandemic, but also bring lasting economic pain to American consumers through the triple transmission mechanism of "new car prices - component costs - insurance costs".

Price shock: price increase across the entire chain from production line to insurance policy

Cornell University transportation expert Art Wheaton warns that a 25% car tariff will immediately push up market prices. Due to the fact that nearly half of the cars in the US market rely on imports, coupled with a high degree of external dependence on key components, terminal car prices may skyrocket by $10000 to $20000. This impact will be transmitted layer by layer along the industrial chain: new car prices will first jump, followed by the rise of original parts, and ultimately insurance companies will have to pass on the cost of claims to consumers - currently, car insurance premiums are 60% higher than before the epidemic, and a new wave of price increases may push this number to a new high.

Economic Paradox: A Dilemma Under Protectionism

Morgan Stanley economist Michael Feroli estimates that tariffs may push the core PCE price index up by 0.3 percentage points to 3.1%, further deviating from the Federal Reserve's 2% target. What's even more tricky is that against the backdrop of consumers' actual purchasing power being under pressure (with the default rate of car loans showing signs of increasing), this "inflation demand" double kill may drag down economic growth by 0.2 percentage points. St. Louis Fed President Musalem pointed out that tariffs are not a one-time impact - when imported cars increase in price, local manufacturers will inevitably follow suit and raise prices, just like "Canadian beer tariffs will lead to price increases for Budweiser", forming a price spiral.

Pains of Transformation: The Long Road of Supply Chain Restructuring

Experts predict that if the Trump administration insists on pushing manufacturing back through tariffs, American consumers will incur significant time costs. Wheaton bluntly stated, "Supply chain relocation requires decades of planning." During this period, car companies not only have to bear the huge investment of relocating production lines, but also face the cost surge caused by import component tariffs. This' transformation vacuum period 'may last for many years, and consumers will be forced to weigh the difficult trade-off between paying high prices for imported cars and waiting for local production capacity to increase.

summarize

This automobile tariff storm is creating market distortions that are more persistent than the pandemic. Unlike temporary supply chain disruptions during the pandemic, the artificially created price barrier caused by tariff policies may take the entire automotive industry ten years to digest. When the beautiful vision of 'Made in America' encounters the cruel reality of 'ability to pay', it is still the ordinary consumers who sigh at the price in the car show hall who ultimately bear the cost of this protectionist experiment.

The US dollar may benefit from hedging and interest rate expectations in the short term, but there is a hidden risk of long-term trade imbalances; The US stock market may present a "dual sky of ice and fire" - traditional manufacturing industries will benefit locally, while sectors that rely on global supply chains will face a reassessment. If the tariff scope is expanded to key areas such as semiconductors, market volatility will further intensify.