MW Trump warns automakers not to hike prices. What power do presidents have?

By Victor Reklaitis

Car dealers say the tariffs announced Wednesday 'could put the purchase of a new car out of reach for an increasing number of American consumers'

President Donald Trump told U.S. automobile executives earlier this month that they had better not raise car prices because of his tariffs, according to a Wall Street Journal report.

Execs were left rattled and worried they would face punishment from the Trump administration if they hiked prices, the report added.

But analysts are skeptical about what Trump could actually do to keep car prices from going up, which they view as unavoidable in the wake of the president's rollout of new 25% taxes on imported vehicles and some imported car parts.

Related: Why it's now impossible to buy a 100% 'Made in the USA' car

"There's no way to avoid them, even though Donald Trump came out and said that he doesn't want to see prices increase. I'm not sure how much he can control it," said Steve Man, global lead director for auto and industrial market research at Bloomberg Intelligence. Even if automakers like Ford $(F)$, General Motors $(GM)$ and Stellantis $(STLA)$ somehow don't raise their prices, car dealers - which are typically independent from manufacturers - will hike them for buyers and already have started to indicate they're doing that, according to Man.

The car business is a free market with buyers and sellers determining prices, Man told MarketWatch. He said: "The buyer will speak if they want to buy the vehicle at the price or not buy the vehicle at the price. In the case of Honda $(HMC)$ and Toyota $(TM)$, there is a broad demand for those vehicles, and buyers may be willing to actually pay up."

Could automakers end up as targets of some type of executive order from Trump as he seeks to prevent higher car prices? It could be similar to the way he has aimed some recent orders at law firms.

Man said Trump insisting on no price increases and making use of executive orders to achieve that looks like an approach that would hit earnings for a key industry. "He can definitely, if he wants to, issue an executive order," the Bloomberg Intelligence analyst said, "but it will be really negative for the auto industry, because it will certainly squeeze really thin margins."

Ed Mills, a Washington policy analyst and managing director at Raymond James, indicated that executive orders against automakers can't be ruled out.

"Everything is a possibility at this point, and that's what makes predicting a lot of this very difficult," Mills told MarketWatch. "I've told clients that we're on a bit of a roller coaster, because Trump and Trump alone gets to make these decisions. He gets to add the tariffs, remove the tariffs, and he has quite a bit of authority, so if it gets challenged in courts and one authority gets shut down, he will pivot to a different authority."

Mills also said he wouldn't rule out the Trump administration putting pressure on automakers via regulators or the use of federal spending plans that affect that industry.

"Trump is someone who is not afraid to use any lever of the United States government to get his preferred policy outcome," the Raymond James analyst said. He noted that Trump is "transactional" and reportedly told U.S. auto executives that they should be grateful for his efforts to roll back the Biden administration's emissions requirements.

While Democratic politicians called last year for banning price gouging and for the Federal Trade Commission to investigate spikes in prices for food or other goods amid persistent inflation, Mills said it could be a different story if the FTC went after automakers this year. He said the car companies could challenge any FTC action by arguing that they're not increasing prices because they're seeking higher profit margins, but rather to offset increased costs that they're directly bearing.

Trump's warning to automakers about price hikes "shows just how price-sensitive he continues to be - that he wants to have the tariffs go into effect, but does not want to have the consumer be impacted," Mills said. "It's unclear how that's going to be accomplished."

What car dealers and automakers are saying

Lobbying groups for car dealers and the Big Three U.S. automakers raised concerns about pricing as they reacted to the new 25% tariff on imported cars and some parts that is due to take effect next week.

"The tariffs announced Wednesday could put the purchase of a new car out of reach for an increasing number of American consumers. It is essential that the potential impact of tariffs on consumers and main street businesses be fully considered," the National Automobile Dealers Association said in a statement.

American Automotive Policy Council President Matt Blunt said it is "critical that tariffs are implemented in a way that avoids raising prices for consumers and that preserves the competitiveness of the integrated North American automotive sector that has been a key success of the President's USMCA agreement," referring to the U.S.-Mexico-Canada Agreement.

The AAPC represents Ford, GM and Stellantis. The three companies' stocks were on track for weekly drops of 3% to 7%.

Now read: GM and Ford will be hurt by tariffs, but here's why the stocks are still a buy

And see: Ferrari wastes no time announcing price hikes - though it's not going to pass along the entire tariff increase

Plus: Cars were breaking Americans' budgets even before Trump's auto tariffs

-Victor Reklaitis

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

March 28, 2025 16:07 ET (20:07 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.