JUANA SUMMERS, HOST:
President Trump has opened up a new front in his trade war. Starting next week, Trump plans to impose a 25% tax on all imported cars and car parts. That's expected to push new car prices up, even as the value of automakers' stock is falling. NPR's Scott Horsley joins us now to talk about the economic ripple effects of the president's new tariffs. Hi there.
SCOTT HORSLEY, BYLINE: Hi.
J SUMMERS: So Scott, the president described domestic carmakers as thrilled about these new auto tariffs, but their investors - they don't look so happy. What's going on here?
HORSLEY: Yeah, most auto stocks were down today. General Motors shares dropped more than 7%. Investors are nervous because even the Detroit automakers import some of their cars and a lot of their parts, so they're going to get hit with these tariffs. Tesla is an exception. The electric carmaker relies less on imported parts, so its stock is up today. But President Trump wants all the carmakers to build more of their vehicles here in the United States.
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PRESIDENT DONALD TRUMP: This will continue to spur growth like you haven't seen. Before I was elected, we were losing all of our plants. They were being built in Mexico and Canada and other places. Now those plants largely have stopped, and they're moving them to our country.
HORSLEY: The unionized autoworkers cheered the president's move. They're hopeful more cars and parts will be built in the U.S. But, you know, it's not entirely clear that's really going to happen. The White House is also counting on these tariffs to raise about $100 billion a year for the government, and the only way that happens is if most of the manufacturing stays where it is. If production really were to shift to the U.S., then that tariff revenue would go down.
J SUMMERS: OK, Scott, what if you're a person who's in the market for a new car right now? What does this mean for them?
HORSLEY: Well, if you're thinking about buying a new car soon, you might want to get out and do it this weekend before the tariffs take effect. Inflation over the last few years has already pushed the average price of a new car up to about $47,000. Add a 25% tax on top of that, and the sticker price goes up nearly $12,000 more. Now, obviously, car manufacturers might absorb some of that tariff expense, but Jessica Caldwell of the car shopping guide Edmunds says this tariff is sure to push today's already high car prices even higher.
JESSICA CALDWELL: It feels just like another blow to, like, an average middle-income person that had been struggling to buy a car before. And it's not like eggs, where we can complain about it, but we could still afford it. I mean, this becomes just not affordable for people to even try to buy 'cause it's such a large purchase.
HORSLEY: As a result, more people will have to buy used cars, which will then push those prices up. And don't think you can avoid these price hikes just by buying an American-made car. We've seen with Trump's other tariffs, when the import prices go up, even the domestic producers raise their prices to match.
J SUMMERS: How are other countries responding to these tariffs?
HORSLEY: It's a mix - both anger and some hope that perhaps an accommodation can be reached. You know, the tariffs don't take effect until next week, so there is some time for the White House to back down, and that has happened before. But Trump insists these tariffs are permanent. Way back in the 1960s, the U.S. slapped a 25% tax on imported pickup trucks. That was supposed to be a short-term response to Germany's tax on imported chicken. We're still living with that pickup truck tax half a century later. It's a big reason that domestic automakers are so focused on pickups. Former Treasury Secretary Larry Summers says, once tariffs like this are in place, they're awfully hard to get rid of.
LARRY SUMMERS: Tariffs are like a hotel that you check into. It's very hard to check out of if it turns out to be a terrible and unsafe hotel.
HORSLEY: President Trump's also threatening more tariffs on imported lumber and pharmaceuticals and other products. So all this could ratchet up.
J SUMMERS: NPR's Scott Horsley, thanks.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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