Looming tariffs on steel and aluminium in the US “will drive new car prices higher and can also potentially fortify the US industrial base,” according to Bertrand Rakoto, director, global automotive practice leader, at Ducker Carlisle, a consulting firm based in Troy, Michigan.
The ultimate impact “all depends on the extent to which those tariffs are expected to remain in place, or possibly be adjusted, in the renegotiation of the USMCA [United States-Mexico-Canada Agreement],” which comes up for renewal in the first quarter of 2026, Rakoto told Fastmarkets in an interview.
Long-term vs. short-term effects
“We know that, for example, the Section 232 tariffs on steel and aluminium from the first Trump administration remained in force during the Biden administration. As these new [pending] tariff measures apply for a durable period of time, we can expect positive effects in the long term,” the consultant said.
To the extent that the tariffs can impact consumer purchasing activity, they can also impact demand for key steel product sectors, such as cold-rolled coil, galvanized sheet and special bar-quality steel, according to industry analysts and market participants.
“The challenge [for US automakers] will be navigating the transition to those tariffs, and the scope of freedom for action that automakers and their suppliers have to maneuver around that or work with it,” Rakoto said. “During that period of time, we might see some short-term issues and price increases.”
“We know that Section 232 tariffs on steel and aluminium, if applied, will result in higher prices for automobiles because over 60% of the weight of the car is in steel or aluminium,” the consultant said. “So if you tax the aluminium and steel coming from just Canada and Mexico, that can create a price increase of 5-8% per vehicle, if tariffs costs are passed through to the consumer.”
Reshoring efforts and cost absorption
Rakoto noted that “some of the higher cost can be avoided by reshoring production and materials within the US, but we know US production of steel and aluminium is not sufficient to meet all the needs of US automakers.”
“The question is, who is going to apply that cost to the final price of vehicles and who is going to absorb it? Because we know that suppliers say they might look into ways to absorb the extra cost; others say they’re going to pass this through,” Rakoto said. “So tier one suppliers will pass it through to OEMs [original equipment manufacturers] and the OEMs to the consumer. So, there’s that risk [that tariffs can push up car prices],” the consultant said.
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Currency fluctuations add to tariff challenges for automaker
“Currency has always played a role for automakers. In some years we’ve seen currency issues driving profitability at some automakers. Tariffs can also drive changes in currencies,” Rakoto said.
In the North American market, materials and parts go back and forth across the border, and that will create pressure to absorb the tariff within the supply chain, the consultant said.
“About 80% of aluminum for US automakers comes from Canada, so whoever is buying the aluminum in the US is going to pay that tariff. Therefore, it depends on the vehicle and how much of it is imported.”
The cross-border activity “means the impact of a 25% tariff has more of an impact, and thus the advantage of a domestically produced product or part is usually short lived,” Rakoto said. “The local products will tend to increase their price as well; not to same level of 25%, but we know there’s going to be some price correction effect.”
Additionally, potential reciprocal tariffs — expected to go into place on April 2 — will cover not just steel and aluminium, but also consumer goods as well, Rakoto explained.
Finally, President Donald Trump has also said he intends to impose a potential 25% tariff on imported automobiles.
“We will know more about that on April 2. We don’t have much detail so far,” the consultant said.
Rakoto said he did not expect the automobile tax to be added to the reciprocal tax that the US might impose, given the automobile tax itself is likely to be much higher than expected reciprocal tariff charges.
Impact of tariffs on consumer demand
If there is a price increase on US automobiles as a result of the tariffs, “of course it will mean less consumer demand for new cars,” the consultant said
Automakers might try rebates or other financing arrangements to help reduce the overall cost of the car, but with current high interest rates, it’s likely that the market will slow down in total production from the previous year, he said.
“We know that President Trump likes to use tariffs as a negotiation tool, so we can hope and expect that a lot of those tariffs will not come into effect,” Rakoto said.
Initially there will be a delay in reshoring production into the US, the consultant said.
“The decision automakers and suppliers make [on reshoring] will depend on whether target rates are applied without exemption, and whether the tariff targets are likely to stay,” Rakoto said. “You don’t make decisions overnight to produce or change production. For some small companies that might be easier. But for large companies, they need stability, so they will wait for the outcomes of all those discussions before they make a move.”
Automakers and suppliers can take some temporary measures to limit imports, but those are likely to be limited, the consultant said.
“When you make major changes, you need to hire people. You need to make sure you have enough room or capacity to do so. Every automaker has a little bit of agility to make changes, but it can only be done to the measure of what’s available in terms of bandwidth in one factory or another,” he said.
“You cannot move overnight the production of one version of a pickup truck from one place to another location and say it’s going to be fine. There are too many logistical and supply chain issues to do that on a major scale in a short time,” the consultant said
“Automakers will need to see which tariffs will stay, and then strategically adjust over a period of years to get the best results,” Rakoto said.
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