As the Carolina Journal continues to examine the impact of federal tariff policy on North Carolina’s major industries, the spotlight turns to automobiles and auto parts manufacturing. Market experts say as the tariffs reduce imports, it reduces supply, driving up prices for consumers.
On April 3, a 25% tariff was implemented on automobiles. A month later, on May 3, a 25% tariff was imposed on “auto parts.” Products subject to the auto or auto parts tariffs are not also subject to the 50% tariff on steel and aluminum products and steel “not melted and poured in the United States.”
While domestic tariffs are not stacked, domestic manufacturers could be purchasing imported steel or even auto parts “not melted or poured in the US.” However, a domestic car would not be subject to auto tariffs. Foreign manufacturers exporting automobiles to the US would be subject to the 25% auto tariff. But an American manufacturer using foreign steel would be subject to the steel tariff. The only way to avoid being hit with tariffs entirely would be for American steel to be used in the manufacturing of American cars.
As the Aug. 7 tariffs were implemented, import duties on the automotive industry totaled $11.8 billion, at that point.
“In the spring, the Trump administration imposed a 25% tariff on imported vehicles and vehicle parts,” Joseph Harris, fiscal policy analyst for the John Locke Foundation, told the Carolina Journal. “Year-to-date through July, exports have increased from $699.1 million to $955.6 million, representing a rise of approximately 37%. The strongest month of growth occurred in March, when exports climbed to $197.1 million — more than double the $95.1 million recorded a year earlier.”
Through July, year-to-date exports of vehicles and vehicle parts climbed from $699.1 million to $955.6 million, representing a gain of approximately 37%, according to data from the Economic Development Partnership of North Carolina (EDPNC). For 2024, the category was North Carolina’s seventh-largest export, with a total value of $1.3 billion.
As of July, year-to-date, North Carolina’s imports of vehicles and vehicle parts declined approximately 26%, from $4.4 billion to $3.3 billion, according to EDPNC data. In 2024, these products represented the state’s fourth-largest import category, valued at $7.1 billion.
“In 2024, vehicles and vehicle parts ranked as North Carolina’s fourth-largest import, but since the tariffs took effect in April and May, monthly shipments have fallen sharply,” concluded Harris. “Compared to last year, imports from April through July declined from $2.5 billion to $1.5 billion, representing a decrease of approximately 39%. Put differently, for every five vehicles imported during that period in 2024, only about three were imported this year.”
Although domestic producers have seen a modest uptick in activity, exports have surged by roughly $250 million year-to-date, according to Harris. Meanwhile, North Carolina consumers face fewer options. The $1.1 billion drop in imports reflects $1.1 billion worth of affordable vehicles and parts that were available to consumers last year but are no longer accessible this year. This shift highlights how trade restrictions often impose greater costs on consumers than the benefits they provide to domestic producers.
Although domestic producers have seen a modest uptick in activity, exports have surged by roughly $250 million year-to-date, according to Harris. Meanwhile, North Carolina consumers face fewer options. The $1.1 billion drop in imports reflects $1.1 billion worth of affordable vehicles and parts that were available to consumers last year but are no longer accessible this year. He said this shift highlights how trade restrictions often impose greater costs on consumers than the benefits they provide to domestic producers.
Supporters of tariffs argue that tariffs reduce imports, which helps domestic producers, while also arguing that tariffs generate significant revenue, allowing for cuts in other areas. But Harris says it can’t be both, because if tariffs are effective at limiting imports, then there are fewer imports to levy the tariffs on, and thereby, significant revenue will not be generated.
One of the state’s largest automotive companies, Toyota, reported a $3.06 billion hit in tariff duties, the largest reported by an auto manufacturer. According to a report by the WSJ in April, Toyota expects a $9.5 billion hit by the end of the fiscal year in March, resulting in a 44% decline in net profit.
This also follows reports from General Motors (GM) that the company absorbed $1.1 billion in tariff costs in the second fiscal quarter. Due to tariffs, GM estimated a $4-5 billion annual impact. A Wall Street Journal (WSJ) report said the tariff impact resulted in a 35% decrease in GM’s net income.
GM manufactures vehicles for private and commercial use. GM Defense, a subsidiary of GM, also manufactures vehicles for the US Department of Defense (DOD). GM Defense opened a production facility in Concord in 2021.
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