(Zero Hedge)—As the fallout from Trump’s tariff plans comes into relief, a harsh truth is emerging for the automotive industry: there are lots of losers and not many winners. But foreign automakers, those without US facilities, will be hit especially hard.
As Bloomberg notes, from South Korea’s Hyundai to Germany’s Volkswagen, and to a lesser extent America’s own General Motors, many of the world’s most prominent carmakers will soon face higher costs from Trump’s new levies on auto imports and key components. That’s because about 46% of all new cars sold in the US are imported.
“There are very few winners,” Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions, said in a phone interview. “Consumers will be losers because they will have reduced choice and higher prices.”
One notable winner in the tariff chaos is Elon Musk. His Tesla, which has large factories in California and Texas, churns out all the electric vehicles it sells in the US, although as Elon noted late on Wednesday, the company will also not remain unscathed.
Important to note that Tesla is NOT unscathed here. The tariff impact on Tesla is still significant.
— Elon Musk (@elonmusk) March 27, 2025
Ford could also face a less-severe impact than some rivals, with about 80% of the cars it sells in the US being built domestically.
Others will be less lucky: starting April 2, the new 25% tariffs will apply to all imported passenger vehicles and light trucks, as well as key parts like engines, transmissions.
Not surprisingly, the tariffs give automakers that heavily source parts in the US an edge, and Trump also allowed an exemption: the new levies will only apply to the non-US share of vehicles and parts imported under a free-trade agreement with Canada and Mexico. That may soften the blow for vehicles whose supply lines zig-zag across the continent.
Tariffs on parts from Canada and Mexico that comply with the trade deal also won’t take effect until the US sets up a process to collect those levies. The US neighbors could use that window to try to stave off full implementation, even if it’s a long shot.
And while NAFTA, pardon USMCA, nations will do everything in their power to be loopholed out, foreign brands heavily reliant on imported vehicles are fresh out of luck. South Korea’s auto giant Hyundai risks being among the hardest hit: although the carmaker and its affiliate Kia have plants in Alabama and Georgia, and just yesterday announced a $21 billion US expansion plan, it imported more than a million vehicles to the US last year, accounting for more than half of its sales in the country, according to figures from Global Data.
Hyundai “remains committed to the long-term growth of the US automotive industry through localized production and innovation,” the company said in a statement, noting it employs 570,000 people in the US. Unfortunately, according to Trump, it should employ many more, and if the company – which imports almost 60% of the cars it sells in the US – wishes to avoid tariffs, it will have to not only hire more American workers, but build many more US plants. Oh, and this is just the beginning: once the reciprocal tariffs kick in next week, South Korean exporters will find themselves in a world of pain.
What about Japan? Let’s take a closer look at the country which historically has been the biggest global auto maker, and which produces 1.3 million (and another 0.4 million tolled in Mexico) of the 16 million annual car sales (Toyota 0.6mn, Subaru 0.3mn, Nissan 0.2mn, Mazda 0.2mn, MMC 0.1mn, Honda 0.01mn). For Japan, autos account for >30% of Japan’s exports to the US, which imports about 46% of all autos sold each year.
Based on an average sales price of US$45,000, the value of imports would exceed US$330 billion, and US import tariffs could have a major impact on sales prices and auto demand. All else equal, they would raise about $100 billion in annual tax revenues. But all else will certainly not be equal, especially once exporting nations slide into recession, and their export industries are crippled.
In an analysis published three weeks ago (report available to pro subs), Goldman looked at one scenario where Japanese cars are hit with 25% tariffs, along with imports from Mexico and Canada. The results were dire. According to Goldman analyst Kota Yuzawa, the potential impact on Japanese auto companies’ operating profit – assuming a tariff of 25% on Japan in line with that imposed on imports from Canada and Mexico – is shown below. In this scenario Goldman assumes that sales volumes decline as a result of price hikes made by each company in order to offset the negative impact of tariffs (volume decline of 8-26% based on a 25% price hike for Canada/Mexico/Japan-made vehicles). In that scenario the profit hit will be anywhere between 6% for Toyota to 59% for Mazda.
In terms of exposure, Yuzawa calculates that production volume in US is largest for Subaru (39%), Honda (27%), Toyota (13%), Nissan (13%), Mazda (7%).
In another, far more draconian scenario, Japanese automakers are unable or simply refuse to hike prices to offset volume declines. The consequences are catastrophic and result in the following hit to operating profits: Toyota -¥570 bn, Honda -¥350 bn, Nissan -¥130 bn, and Mazda -¥60 bn. The implied impact on Goldman’s FY3/26 operating profit forecasts would be as follows: Toyota -11%, Honda -23%, Nissan -66%, and Mazda -34%, with Nissan and Mazda seeing relatively large impacts given their larger export mix from Canada/Mexico.
That’s just the start: in addition to the direct potential impact on finished vehicle exports described above, parts makers also have supply chains spanning multiple countries. Indeed, Toyota-affiliated companies that announced 3Q (October-December) results on January 31 referred to tariff risks. Denso’s sales from Mexico/Canada operations to the US total about ¥220 bn, while Aisin’s are about ¥60 bn. If a 25% tariff were also imposed on parts, Goldman warns forecasts potential profit declines of ¥55 bn/¥15 bn at Denso/Aisin. Toyota Boshoku did not disclose figures but noted a large potential impact, as much of its seat sewing is conducted in Mexico. Parts makers are working to pass on higher costs to automakers. Denso’s management expressed hope that tariff impact would be mitigated to some extent by the possibility of US corporate tax cuts and a weaker Mexican peso.
Two Storms, One Harvest
Every food crisis in living memory has been a one-shock event. The 2008 price spike was a commodity bubble. The 2020 shortages were a logistics failure. The 2022 grain scare was a war on one exporter’s ports. Each time, the system bent, adjusted, and recovered, and each time the experts assured us afterward that global markets are simply too big and too diversified to fail.
What nobody in Washington seems eager to discuss is that 2026 is shaping up to be something the modern food system has never actually faced. Two independent shocks, one climatic and one geopolitical, are converging on the same harvest cycle at the same time. Not sequentially. Simultaneously.
Start with the weather. The Pacific Ocean is currently building toward what forecasters now openly call a record event. NOAA’s Climate Prediction Center puts the odds of at least a strong El Niño near 88 percent, with roughly two in three odds it reaches “very strong” status, the tier reserved for perhaps three or four events in the entire satellite era. Every major global model now projects a median peak in Super El Niño territory, and most of them project it exceeding the 2015-16 event, which until now held the modern record. Sea surface anomalies were already brushing the super threshold in mid-July, months before these events normally peak. The atmosphere has already shifted into El Niño mode, and the event is forecast to crest in late fall and early winter.
This is not about “climate change.” It’s about the standard cycles of weather, and the cycle we’re currently in is one that has likely devastated societies in the past. We’re better prepared as a society today, but not all Americans are equally prepared.
Serious households have started doing the quiet math on their own. Grocery bills tell part of the story, and the forecast maps tell the rest, which is why long-term food storage has moved from fringe hobby to mainstream line item in the family budget, with established suppliers like Heaven’s Harvest seeing demand from people who five years ago would have rolled their eyes at the idea. That instinct is not paranoia. It is pattern recognition, and the pattern is worth walking through carefully.
Editor’s Note: Heaven’s Harvest IS a sponsor, but the warnings of this article are real and would be written even if we didn’t have a survival food sponsor. With that said, those who take advantage of what they offer can use promo code “Patriot” for 15% off.
The Fertilizer Clock Is Already Running
While the Pacific warms, the second shock has been unfolding in the Strait of Hormuz. The conflict with Iran turned the world’s most important energy chokepoint into a contested waterway, and the consequences reach far beyond the gas pump. Roughly a third of global fertilizer trade moves through Hormuz, and the disruption sent urea prices up 86 percent year over year by March, with a 53 percent jump in a single month.
The World Bank projects energy prices rising about 24 percent in 2026 and fertilizer about 31 percent. By its own accounting, fertilizer prices ran 35 percent higher in the first five months of this year than the same period last year.
Here is the mechanism the nightly news will not explain. Fertilizer is not a grocery item. It is a time-delayed input. The nitrogen a farmer in Iowa or Punjab could not afford to apply this spring does not show up as a problem this spring. It shows up as a thinner harvest six to twelve months later.
The World Bank’s own food security brief concedes that the effects of reduced applications earlier this season “are likely to become visible only later in harvest outcomes.” Translate that from institutional language into plain English and it means this. The damage is already done, it is already in the ground, and we are simply waiting for it to arrive on the shelf.
Now check the calendar. Six to twelve months from the spring planting season lands us squarely in late 2026 and early 2027. Which is precisely when the strongest El Niño in the instrumental record is forecast to peak, bringing its signature droughts to Southeast Asia, Australia, southern Africa, northern Brazil, and South Asia, the very regions that grow the world’s rice, sugar, and oilseeds.
The World Bank warns openly that a strong El Niño “could disrupt multiple crop belts simultaneously” on top of the conflict-driven input costs. Their baseline projection assumes the Middle East disruptions ease by autumn. What in the last two years of Middle East history suggests that assumption is safe?
The System Has No Slack Left
The comfortable answer is that global markets always adjust. But adjustment requires slack, and the slack is gone. Global cereal production is expected to decline from last year’s records even before El Niño does its work. The UN World Food Programme, hardly a den of right-wing preppers, is calling this the most significant disruption to its supply chains since Covid and the invasion of Ukraine, and its supply chain director put the stakes bluntly.
Today’s supply chain challenges are tomorrow’s hunger crisis.
There is also a political dimension that markets cannot price. When food gets scarce, governments do not behave like economists. They behave like politicians. Export bans, hoarding mandates, and panic buying at the national level turned the modest rice shortfall of 2008 into a global crisis, and analysts are already warning that import-dependent nations are the first dominoes.
The 2015-16 Super El Niño, a far weaker event than what is now forecast, threw tens of millions into food stress across Africa and Asia. This one is projected to be stronger, and it arrives with fertilizer already rationed by price and shipping lanes already contested by missiles.
What Joseph Knew
Scripture does not treat preparation for lean years as faithlessness. It treats it as wisdom delivered in advance to those willing to act on it.
Behold, there come seven years of great plenty throughout all the land of Egypt: And there shall arise after them seven years of famine; and all the plenty shall be forgotten in the land of Egypt.
Joseph did not respond to that warning with a hashtag or a committee. He stored grain during the years of abundance, and when the famine came, Egypt stood while its neighbors begged. The lesson is not that famine is certain. It is that the time to prepare is precisely when preparation still looks optional.
Nobody who filled a pantry in a year of plenty has ever regretted it, and nobody standing in an empty aisle has ever been glad he waited for certainty.
None of this calls for panic, and panic is the enemy of sound judgment anyway. It calls for the same unglamorous prudence our grandparents considered ordinary. Keep some cash margin, know your local growers, and put real food in deep storage while it is cheap and available, because the entire arc of this story is that cheap and available is a closing window.
Families looking for a straightforward place to start can visit Heaven’s Harvest and use promo code Patriot for 15 percent off long-term storable food. The forecasts may yet soften, the strait may yet reopen, and we should pray they do. But hope is a fine thing to hold and a foolish thing to eat.
Had Fords and Chevys for years. Then the Big Three made it clear that they were going to only offer what their executives decided to make and customers will just have to like it. Will have to run my VW into the ground.
Run your VW into the ground? That won’t take long.
And now American companies will be jacking their prices up to just below the tariff prices. Just like Harley Davidson did when they talked Ronald Reagan into tariffing Japanese motorcycles. And look what happened to Harley.
At first, I was worried because Japanese are our friends and maybe even the Koreans but if they gonna sell their cars here, most of it should be built here but then Unions are gonna take the profit because they can build cars a lot cheaper over there.
More planning is needed before taking drastic actions.
The only thing that has to happen is these countries drop their tariffs. Reciprocal tariffs means zero tariffs, if the other country drops theirs.
A good idea but the only thing is tariffs were invented to protect local grown manufacturing.
Awesome! Bring back manufacturing to the USA. Politicians and billionaires have sold out the American poor and middle class by pushing manufacturing overseas. The pendulum is swinging back.
Maybe this will give the American carmakers a chance to come back from their long, slow demise. Maybe an American car maker could actually make a car family could afford to buy again? This is their chance while their competition is tariffed. This is their chance to expand their offerings to take what market they can get again. They need to become dominant. American car companies that build their products and source their products only in America are a huge national asset. The car companies in the 1940s mass produced everything we needed in World War II. I would hate to be without that capability.
Except that American car companies make total garbage.
So the Japanese are also dumping all their treasuries. Good timing. And don’t be surprised if they join BRICS.
Of they could simply remove there tariff, we we would reciprocate with same, as the president said.