Ford is warning its dealers that tariffs will likely raise prices in the coming months, the latest impact the import taxes will have on Americans’ finances. President Donald Trump’s 25% tariffs on all imported cars went into effect April 3. In a memo to Ford dealers first reported by Automotive News, the automaker told dealers that the cost of those tariffs could be passed down on some vehicle deliveries starting in June since “certain tariffs are likely to remain in place for at least some time.” “We will not increase the MSRP (manufacturer’s suggested retail price) for any vehicle currently in inventory with our Ford and Lincoln dealers,” Andrew Frick, president of the Ford unit overseeing retail sales, said in the memo. “However, in the absence of material changes to the tariff policy as articulated to date, we anticipate the need to make vehicle pricing adjustments in the future, which is expected to happen with May production.” Ford confirmed the memo’s accuracy to CNN, adding that it is not expecting any imminent change in retail prices at its dealerships. That’s because cars produced in May would not arrive at dealerships until June or later. “Customers will have a lot of choices, and we have plenty of inventory to choose from through June 2,” Ford said in a statement. “The tariff situation is dynamic and we continue to evaluate the potential impact of tariff actions.” Automakers, dealers and American car buyers have been bracing for the impact of tariffs, which could upend the market for car purchases in the coming weeks. Experts says the 25% tariff could raise the cost to build or import cars by thousands of dollars each, as well as reducing the supply of vehicles available for sale. And with the administration also planning to put tariffs on auto parts as soon as next month, that could raise the price of cars even higher since all vehicles built the US contain some imported parts. To help assure customers, Ford previously announced an “employee pricing” discount offer for buyers on most of its vehicles April 3, the day that tariffs on imported cars took effect. But the memo from Ford to its dealer network is a sign of that it could soon be unavoidable for Americans to dodge the impact of tariffs on car prices. Still, there is some hope, since Trump indicated earlier this week he might change the policy on tariffs on auto parts. “I’m looking at something to help some of the car companies where they’re switching …parts that were made in Canada, Mexico and other places and they need a little bit more time,” Trump said in remarks to journalists in the Oval Office. “They’re going to make them here, but they need a little bit more time.” How car prices are set Automakers don’t set the final sticker price for customers – car dealerships do. Most car companies sell cars to dealerships, which are independently owned businesses, who then individually negotiate with buyers for the final price. But if automakers raise the wholesale prices they charge dealers, that could raise the prices for the buyer. Tariffs will raise the cost to build the cheapest American cars by an additional $2,500 to $5,000 and up to $20,000 more for some imported models, according to Anderson Economic Group. Car prices could rise not only due to higher wholesale prices, but also if automakers start to cut back on the number of vehicles they import to or build in the United States. Higher costs from tariffs will cut North American car production by 10% to 20%, Cox Automotive estimates, which means millions of less cars sent to US dealerships. In addition, many foreign automakers will likely halt or curtail production of the millions of cars they import to the United States as higher duties could make them unprofitable. That was 3.7 million vehicles from Asia and Europe in 2024 alone, according to S&P Global Mobility. In fact, Honda confirmed to CNN Wednesday that it plans to halt production in Japan of the hybrid version of the Civic hatchback it had been building for the US market. And if demand stays strong, the basic economic law of supply and demand says that prices will go up if supply is restricted. That’s what happened in 2021, when a shortage of the computer chips needed to build cars limited auto production worldwide. That sent the average price for new vehicles that year 17% higher, according to Edmunds’ data. But prices, which are already near record levels, are not likely to rise as fast this time even with a drop in supply, said Jonathan Smoke, chief economist with Cox Automotive. That’s because customer demand won’t be as strong this time, he said. First, some American car buyers rushed to buy cars before the tariffs took effect, reducing the need to buy cars later this summer. And car buyers in 2021 were not only part of a very strong labor market, but their finances were buoyed thanks to government stimulus and historically low interest rates. Today, consumer confidence is at its second lowest point in readings going back to 1952, which is worse than even during the Great Recession in the first decade of this century. “We do think supply is going to be restricted,” Smoke said. “But the most important difference between what happened in 2021 is demand won’t be as juiced.”
Ford tells dealers prices could go up in June if Trump’s tariffs remain
TruthLens AI Suggested Headline:
"Ford Warns Dealers of Potential Price Increases Due to Tariffs"
CNN
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TruthLens AI Summary
Ford has issued a warning to its dealers regarding the potential impact of President Trump's 25% tariffs on imported cars, which took effect on April 3. In a memo, Ford indicated that if the tariffs remain in place, prices for some vehicle deliveries could increase starting in June. Andrew Frick, president of Ford's retail sales unit, stated that while there will be no increase in the MSRP for vehicles currently in inventory, adjustments to vehicle pricing are anticipated due to the ongoing tariff situation. Ford emphasized that the dynamic nature of tariffs means they continue to evaluate their impact, and for now, customers can still find a variety of vehicles available through June 2. However, the looming threat of increased prices has raised concerns among automakers, dealers, and consumers alike, with experts predicting that the tariffs could add thousands of dollars to the cost of both building and importing cars.
The consequences of these tariffs extend beyond immediate pricing concerns. Analysts forecast that the tariffs could lead to a significant reduction in North American car production, potentially cutting output by 10% to 20%. This production decrease could be exacerbated if foreign automakers decide to reduce or halt their operations in the U.S., as higher duties may render many imports unprofitable. For instance, Honda has already announced plans to cease production of a hybrid model intended for the U.S. market, highlighting the broader implications of the tariff policy. While the basic economic principle of supply and demand suggests that restricted supply would typically drive prices higher, experts believe that the current economic climate—with consumer confidence at a low and demand for cars not as strong as in previous years—may mitigate the extent of price increases this time around. As a result, while consumers may face higher prices due to tariffs, the overall market dynamics could prevent a dramatic surge in vehicle costs compared to previous supply chain disruptions.
TruthLens AI Analysis
Ford's warning to its dealers about potential price increases due to tariffs reflects a significant concern regarding the impact of government policies on the automotive market and consumers. The announcement comes in light of President Trump's implementation of a 25% tariff on all imported cars, which Ford anticipates will affect vehicle pricing and availability.
Implications of Tariffs on Vehicle Pricing
The memo indicates that while Ford will not raise the manufacturer's suggested retail price (MSRP) for existing inventory, future vehicle pricing adjustments are inevitable if the tariffs remain in place. This suggests a strategic approach by Ford to manage customer expectations while preparing for possible price hikes. The anticipated increase in vehicle production costs due to tariffs could lead to higher prices for consumers, potentially dampening car sales and altering market dynamics.
Market Reaction and Consumer Choices
Ford's assurance that there is ample inventory available until June aims to alleviate consumer concerns. By emphasizing that customers will still have choices, Ford seeks to maintain consumer confidence in their brand. However, the looming threat of higher prices may lead consumers to reconsider their purchasing decisions, potentially delaying purchases in anticipation of better deals.
Broader Economic Context
The ongoing trade tensions and tariff policies have broader implications for the automotive industry and the economy. If tariffs extend to auto parts, the costs could further escalate, affecting production rates and the overall supply chain. Automakers, dealers, and consumers are all bracing for the ripple effects of these tariffs, which could lead to decreased vehicle availability and increased prices across the board.
Potential for Manipulation or Hidden Agendas
The language used in the memo and public statements may suggest an effort to frame the situation in a way that minimizes consumer panic while preparing stakeholders for the worst. While the news aims to inform dealers and consumers about potential price changes, it may also serve to manage public perception of the company's stability and reliability in uncertain economic times.
Trustworthiness of the Information
The reliability of this news hinges on the transparency of Ford's communication and the actual implementation of tariffs. Given that Ford confirmed the memo's accuracy, the information appears credible, albeit with an agenda to mitigate consumer concern. The article aims to create a sense of urgency regarding the potential price increases while reassuring customers about the current inventory situation.
Community Impact and Market Influence
The automotive industry is vital to the economy, and news of potential price hikes can influence consumer behavior, market dynamics, and even stock prices. Investors will closely monitor Ford's response to tariffs and how they affect sales figures. Companies in the automotive sector may experience fluctuations in stock performance based on consumer sentiment and government policy changes.
In summary, while the article provides necessary information about the potential impacts of tariffs on vehicle pricing, it also serves a dual purpose of managing public perception and preparing the market for upcoming changes. The nuanced communication from Ford indicates an awareness of the broader implications of tariffs on consumer behavior and the automotive industry.