With Car Tariffs, Trump Puts His Unorthodox Trade Theory to the Test

President Trump and his supporters collided with traditional economists for years on the merits of the rates. Now, the world will see who is right, since the vast withdrawals of the president on cars and the car parts take place in a real -time experiment on the global economy.

In Mr. Trump’s story, rates have a simple effect: they encourage companies to move factories to the United States, creating more American jobs and prosperity.

But for many economists, the effect of rates is far from simple. The rates are likely to encourage the production of long -term domestic cars, they say. But they also cause substantial collateral damage that could return against the objectives of the president for works, manufacturing and economics in general.

This is because the rates will increase the price of cars for consumers, discouraging car purchases and slowing down the economy. The rates may also reiterate supply chains and increase the costs for car manufacturers that depend on the imported parts, reducing the production of short -term US cars.

They could also lead to retaliation on exports of US cars, as well as other products that American companies send abroad, leading to damage to global commercial wars.

Thursday, global equity markets decreased, with automotive actions they hit more hard, since investors absorbed the scope and severity of the plans of Mr. Trump. The actions of General Motors, which import many of its best -selling cars and trucks from Mexico, have fallen by about 7 % in Mezzogiorno negotiations. The actions of Stellantis and Ford were also lower. European actions closed lower on Thursday, with the car manufacturers who underwent the worst losses.

While the car manufacturers and economists hurried to rework their growth predictions, the American allies slammed Mr. Trump for imposing rates, stating that the withdrawals would destabilize the global economy and promised to take revenge.

Brad Setser, an economist of the Council on Foreign Relations, said that the rates will probably lead to greater long -term automotive production. But getting there would be “truly disruptive”, he said, and expensive for both American consumers and American economics.

Setser said that foreign car manufacturers are unlikely to renounce the US market and that brands such as Toyota, Hyundai and Mercedes could end up making more cars in the United States to avoid paying the rates. In the shortest race, however, higher prices could convince some American consumers not to buy cars.

And this, together with the interruptions of the supply chains that cross Canada and Mexico or depend on foreign parts, could actually cause the production of short -term US cars.

Almost half of all vehicles sold in the United States and 60 percent of all parts used in automotive factories are imported. Daniel Roeska, Bernstein’s analyst, provided that the car manufacturers could see the costs increase by $ 6,700 per vehicle sold.

“You could, due to the interruption along the road, have something that resembles a cyclical crisis in the automotive sector, with layoffs, with lost jobs, even in places that will attract new investments and will grow over time,” said Setser.

“This is a fairly risky move,” he added.

Economists have said that the approach will probably have negative sides not only for foreign car manufacturers such as Toyota and Mercedes, but also for US brands.

Jim Reid, a search strategist of Deutsche Bank Research, observed that they were not only cars abroad to collapse, but also those for general engines, which assembles just over half of his cars purely in the United States, he said. “So pain is happening nationally and abroad.”

“The more you listen to the current American administration, the more you appreciate the fact that they are ready to sacrifice the performance of the short -term market and economic growth if it is necessary to achieve their longer term objectives,” he said.

Economists also questioned the statements of Mr. Trump according to which rates strengthen economic growth, investments and hiring, suggesting that they could do the opposite.

Thursday, in a note, the economists of Barclays Research have declared that they had revised their predictions and now expected that global and American growth would significantly slow down from the levels of 2024. “But if worse results are realized on the rates, even those forecasts could end up being too optimistic”, they wrote.

Marc Giannoni, the American economist in Barclays, said that uncertainty about the direction of commercial policy would encourage companies to resist making new investments in factories and taking more workers in the coming months.

“We expect companies to take less in the coming months,” he said. “The companies that are pausing the investment decision are probably also to pause the hiring decision. So let’s see a lot of reduction in the job application.”

Trump denied that the rates would have many negative effects, instead indicating multiple corporate ads of new investments in the United States. In addition to introducing further rates on imports from China, Canada and Mexico in recent months, Trump has planned to announce more rates next week, which has said that he will make the more fair global trading system.

Speaking to the White House Thursday, the president said that “business is returning to the United States so that they don’t have to pay the rates”.

“Many companies will be in great shape because they have already built their plant, but their plants are underutilized, therefore they will be able to expand them in an economic and quick way,” he said. He added that “others will come to our country and will build, and are already looking for sites”.

But others say that car manufacturers will probably wait to see if the rates will last. Although Mr. Trump said on Thursday that they would be permanent and the White House said that they would not be granted exclusions, both foreign countries and companies seemed to hope that the president would give in.

“Although it was clear enough that we mean, we know that from previous precedents we should not assume that these things are a deal done until they really are really,” said Jennifer McKeown, head of the global economist of Capital Economics.

Kit Johnson, a customs broker in Savannah, Georgia, who helps car manufacturers with their imports, said he had been on the phone with customers all morning of Thursday, and at the moment there was “a great scramble to understand what to do”.

Tariff statements in recent weeks had made it difficult to plan its customers. “Each announcement that comes out, there are planning sessions, are performing different models to understand what the financial impact will be,” he said. “It was one thing after the other.”

Johnson said he believed that the rates were “counterproductive for the declared objectives of the administration”.

Many companies wanted to produce more in the United States and gradually bringing their suppliers while they do it. But the rates would have “put to the test” while trying to dedicate more resources to the expansion of US investments, said Johnson. “It’s a kind of Catch-22.”

The other main question is if the rates will move into a larger commercial war. Trump declared on social media on Thursday that he would punish the European Union and Canada if they had tried to work together to fight against his rates.

“If the European Union works with Canada to make economic damage to the United States, large -scale rates, much larger than expected, will be placed on them to protect the best friend that each of these two countries have ever had!” Mr. Trump wrote.

Foreign leaders responded with anger, even if nobody immediately announced retaliation. Trump presented his rates on the basis of the United States National Security, a concept that has traditionally classified close allies such as Canada, Europe and Japan.

Canadian Prime Minister Mark Carney said that his country would introduce further retaliation rates in the United States, but will not be finalized until Wednesday, when Trump planned to introduce his so -called mutual withdrawals.

“We will reply forcefully,” said Carney. “Nothing is out of the table to protect our workers and our country.”

President Emmanuel Macron in France declared Thursday that he had told Trump during a discussion the day before the rates were not “a good idea” and said the Europeans would reply by reciprocating in the hope of convincing the President of the United States to reconsider.

The president of Mexico, Claudia Sheinbaum, said to journalists: “We will always protect Mexico”. The Mexican government would issue “an integral response” to all US rates – which so far also include withdrawals on steel and aluminum – hitting the country on April 3, he said.

“This does not mean that we close the door in the United States on April 3,” he said. “The door is open for interviews with the United States government.”

Economists have provided that the rates could be particularly devastating for Canada and Mexico, which have been integrated into the North American car supply chain for decades. The rates also raise questions about the commitment of the United States towards various commercial agreements.

Wendy Cutler, vice -president of Asia Society Policy Institute, said that the rates would have “a devastating impact on many of our close commercial partners: Japan, Korea, Mexico, Canada and Europe” and that the United States had free exchange agreements with three of those five governments.

Flavio Volpe, president of the Canada association of car spare parts producers, said that the rate could lead to arrests in the sector through North America within a week.

“He is using a truly frank tool,” said Volpe by Mr. Trump. “A million cars in Canada per year are made by American producers with American parts of 50 % and 55 % of American raw materials and are ready to push them from a cliff to make a point that nobody understands.”

The report was contributed by Danielle Kaye, Ian Austen, Liz Aldman AND Emiliano Rodríguez Mega.