A new 10% tariff on goods imported to the United States from China will undoubtedly drive up some costs for the U.S. auto industry, experts said, but the damage will be minor compared with what could happen with the proposed 25% tariffs on products out of Mexico and Canada.

On Tuesday, President Donald Trump imposed a 10% tariff on products from China. China hit back with a 15% tariff on imports from the United States.

The Detroit Three buy components from China for cars made in the United States. They also build cars there that they sell here. And they sell cars in China that they make in the United States. So an impact from the new tariffs is unavoidable, but most analysts expect it to be muted. That's because automakers reshored many of the parts they once bought from China after Trump imposed a 25% tariff on those parts in 2018.

But just because the extra cost to automakers, and possibly consumers, from the China tariff will not be as deep as a 25% tariff on Canada or Mexico would be, experts said, there are still a lot of components used in the assembly of cars in the United States that come from China. So costs will inch up.

“It will be felt, not across the board, but there are a lot of suppliers doing a lot of financial planning right now,” said Glenn Stevens, executive director of MichAuto. “Now your costs just went up X% and it’s a thin margin business. So it will cost suppliers more and automakers more.”

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To be sure, the vehicles U.S. automakers make in China and sell in the United States will see an extra 10% tax on them to enter the states, Stevens said. But whether the automakers absorb the extra cost themselves or pass it on to consumers remains to be seen.

High car prices go higher?

Automakers don't even know the answer yet. They are still processing the proposed 25% tariff on goods from Canada and Mexico, which has been delayed a month while the Trump administration negotiates with those governments.

Ford Motor Co. CEO Jim Farley told Wall Street on Wednesday that if Trump imposes tariffs on Mexico and Canada, it would wipe out billions of dollars in profits and lead to many U.S. job losses.

But when it comes to the impact from the tariff on China, Farley said, “We’re closely monitoring the situation in China.”

Similarly, General Motors spokeswoman Liz Winter told the Free Press, "We're assessing the situation; nothing to share at this time."

Stellantis, the automaker that makes Chrysler, Dodge, Jeep, Ram and Fiat brands, declined to comment on how the China tariff might impact its business.

Stevens said it is a fine line as to whether automakers can absorb a 5% or 10% increase in costs to bring in vehicles made in China to sell in the United States given profit margins are already thin. GM builds the Buick Envision in China and Ford makes the Lincoln Nautilus there. The Envision starts at $37,895 and the Nautilus starts at $53,485, according to Kelley Blue Book.

Stevens said those are already "pretty high sticker-priced vehicles" and tacking on a 10% price hike could erode sales.

"It’s very early to tell," whether automakers will need to boost the prices on vehicles made in China, Stevens said. He added, "The earlier impact is speciality forging and speciality metals coming from China. That’s where the impact will be felt by suppliers. I don’t know what that is, but it is still substantial."

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Job losses should be minimal

There could be good news out of this China tariff if it prompts suppliers to make more parts stateside, which is Trump's goal. That would theoretically create jobs, the analysts said. The problem is that not all components made in China can be made here.

"It’s a large equation of all the costs," said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. "It might make North American production more feasible. But it’s more likely that, because they’ve already pulled out all the parts they could from China, the ones remaining have a need to be built in China … whether that’s semiconductors or some other specialized part.”

Fiorani said because tariffs have been rising for years, the auto industry has had time to prepare for it so there’s probably a minimum impact. That will be welcome news by the manufacturing labor market.

“Thanks to the industry moving away from the reliance of Chinese parts, it should keep job losses to a minimum this time around," Fiorani said.

The effect of China's retaliatory tariffs

As for any retaliatory tariffs by China on U.S. goods coming into its market, Fiorani said, the impact is almost nonexistent. That's because it has taken the automotive industry a long time to even get into the China market and its sales there account for a small share of the whole market, he said.

For all of last year, 23.1 million new vehicles were sold in China. Of that, just 637,000 were imports, Fiorani said. North American-sourced import vehicles into China made up an even smaller portion of that 637,000. The bestselling North American-built vehicle that is sold in China is the BMW X4, made in Spartanburg, South Carolina. A mere 8,000 were sold in China for all of last year.

Fiorani said that among the Detroit automakers, Ford's Lincoln Navigator is the bestselling North American-built vehicle sold in China. It sold a scant 715 in China for all of 2024.

"Supplies of parts from China and a reliance on exports to China have been minimized because of many companies anticipating China would retaliate at some point from the 2018 tariffs," Fiorani said.

Will it stick or not?

Trump's first round of tariffs against China in 2018 included a 25% tariff on various parts used by the auto industry, said Laurie Harbour, a partner who covers the manufacturing sector at consulting firm Wipfli. That means this new tariff could push the tax up to 35% for those parts.

Harbour agreed with Fiorani that the industry does not import much into China, so the retaliatory tariff won’t hurt as much as the 10% tariff on parts made in China coming to the States. She said the Detroit automakers still buy $1.5 billion to $3 billion of tooling from China annually.

"I guarantee every purchasing department at the automakers are evaluating every part and whether they need to move things or not," Harbour said. "There’s the uncertainty of if (the tariff) will stick or not. We saw Mexico and Canada get lifted quickly. I don’t think this will happen as quickly."

The tariff is meant to drive jobs into the United States, but Harbour said, "It’s not a guarantee.” For one thing, much of the reshoring of products from China since 2018 went to Mexico rather than the United States, Harbour said.

Economist Michael Hicks of Ball State University studied the impact from Trump's first tariffs, which President Joe Biden left in place. It took about six months before the United States saw the first impacts on costs rising on goods from China and a loss of jobs across all types of U.S. manufacturing and agriculture.

His data showed that in January 2017, Michigan had 617,000 manufacturing jobs. By the time the tariffs hit in March 2018, there were 627,000 manufacturing jobs with employment hitting a peak in December of that year at 633,900. But that would be the last time Michigan saw that level of employment in manufacturing.

"In January 2020, the last month before the COVID pandemic hit, there were 619,000 manufacturing jobs in Michigan," Hicks said. "So the Trump administration had effectively killed off all the manufacturing job growth by the month before COVID, and that was due to tariffs.”

This story has been updated with added information.

Jamie L. LaReau is the senior autos writer who covers Ford Motor Co. for the Detroit Free Press. Contact Jamie at [email protected]. Follow her on Twitter @jlareauan. To sign up for our autos newsletter. Become a subscriber.