US Autos: Tariff Recommendation Rerack

We observe that the adverse profit impacts of US import tariffs on autos/parts on automakers and suppliers are largely reflected in current market spreads. However, China’s recent export suspension of certain rare earth metals and magnets, crucial to the automobile industry, could potentially disrupt automotive production if it continues for an extended period. According to the NY Times, American auto companies “keep little or no [rare earth] inventory because they do not want to tie up cash in stockpiles of cost materials,” while some Japanese companies have more than a year’s supply, having learned from a previous embargo on rare earth exports to Japan in 2010.

US auto import tariffs appear to be a lasting element, at least for now. The approach to US auto import tariffs has evolved from being a bargaining tool earlier in 2025 to a strategic effort aimed at reversing the decline in manufacturing jobs within the automotive sector by reshoring US vehicle production.

While adjustments to the auto tariff policy, such as tariff relief for certain auto parts, may occur, the current view is that the auto tariffs will remain a policy throughout President Trump’s second administration, ending in January 2029, and that auto industry management teams will plan accordingly.