Trump's 25% Auto Tariff Raises Will Put Pressure On Interest Rates, Says Economist — Tesla Investor Gary Black Says President Found 'Further Ways To Push The Economy Into Recession Today' - BYD (OTC:BYDDY), AutoNation (NYSE:AN)

President Donald Trump‘s announcement of a 25% tariff on auto imports has sparked widespread concern among economists and market analysts, with many warning of potential severe economic consequences.

What Happened: The tariffs, set to take effect on Apr. 3, aim to boost domestic auto manufacturing but could trigger significant market disruption. Prominent economists have raised alarms about the potential economic fallout. Peter Schiff highlighted that the tariffs will increase car prices and potentially put upward pressure on interest rates.

Trump imposed 25% tariffs on imported cars, which will raise the price of all cars. Then he's also proposing the tax deductibility of interest on loans to buy domestic cars. Since cars will cost more, the size of auto loans will rise, putting upward pressure on interest rates.
— Peter Schiff (@PeterSchiff) March 26, 2025

Economist Justin Wolfers suggested the tariffs might discourage car purchases, potentially creating a ripple effect across the automotive market.

We've been thinking about buying a second car, but with tariffs boosting the cost of imports by 25% — and reduced competition boosting prices of domestics — I might just wait a bit, hoping he walks it back.

Now work through the macro consequences if others have similar thoughts.
— Justin Wolfers (@JustinWolfers) March 26, 2025

Gary Black of The Future Fund LLC was even more direct, stating that Trump has “found further ways to push the economy into recession.”

Trump (aka Tariff man) found further ways to push the economy into recession today, signing a proclamation to implement a 25% tariff on auto imports, expanding a trade war designed to bring more manufacturing jobs to the US and setting the stage for an even broader push on levies…
— Gary Black (@garyblack00) March 27, 2025

Providing historical context, Scott Paul, President of The Alliance for American Manufacturing, noted that ‘Trump would not be 1st POTUS to suggest higher tariffs on autos,’ citing long-standing tariffs on pickup trucks and recent tariffs on Chinese EVs.

Trump would not be 1st POTUS to suggest higher tariffs on autos. We've had 25% tariffs on pickup trucks (- Canada & Mexico) for 40+ years. Biden imposed 100% tariffs on Chinese EVs to prevent them. US absorbs more car imports than any other nation by far…via @dunne_insights pic.twitter.com/qQGdNdXDyH
— Scott Paul (@ScottPaulAAM) March 26, 2025

The United Auto Workers, meanwhile, advocated for auto companies to absorb the tariff costs, stating, ‘auto companies…should absorb the cost of these tariffs rather than passing them on to consumers,’ suggesting potential legislative support.

As they shift their supply chains and investments to the US, auto companies that have enjoyed years of record profits should absorb the cost of these tariffs rather than passing them on to consumers, and the UAW would support legislative or regulatory action requiring them to do…
— UAW (@UAW) March 26, 2025

Why It Matters: The market’s immediate reaction was negative, with the S&P 500, tracked by SPDR S&P 500 SPY, dropping 1.1% and the Nasdaq 100, tracked by Invesco QQQ Trust, Series 1 QQQ, falling 1.83%. Automotive stocks saw significant declines, with Tesla Inc. TSLA dropping 5.6% and General Motors Co. GM falling 9.11%.

The tariffs will primarily affect non-U.S. content in autos under the USMCA trade pact. The Trump administration argues that U.S. automakers have sufficient capacity to increase domestic production and avoid tariffs.

Some potential beneficiaries include companies with strong domestic production, like Tesla, Toyota Motor Corp. TM, BYD BYDDY, and domestic used car dealers such as AutoNation Inc. AN and CarMax Inc. KMX.

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