There is no such thing as an all-American car. That’s why tariffs could raise all car prices

President-elect Donald Trump’s vowing to protect American-made cars through steep tariffs on imports. The problem is, there is no such thing as an all-American car.

President-elect Donald Trump is vowing to protect American-made cars through steep tariffs on imports. The problem is, there is no such thing as an all-American car. Trump has promised that tariffs, which are a tax on goods that are imported from another country, will be a key part of his economic plan in his second term. On Monday he announced plans to impose a 25% tariff on all goods coming from Mexico or Canada on his first day in office. The US government tracks what percentage of each car’s parts is made “domestically.” But under current trade law, both Canadian-made parts and US-made parts are counted as the same domestic content. Even with the broader definition of “American made,” none exceed 75%. That’s why auto prices could rise sharply if Trump goes ahead with plans to impose steep tariffs on the parts that go into the “American” vehicles found in showrooms nationwide. The auto industry supply chain depends on parts and materials from around the globe – from relatively inexpensive nuts and bolts that are cheaper to buy from foreign producers, to expensive computer chips and other electronic components that aren’t made in sufficient quantities in US factories to meet demand. But despite his claim that tariffs are paid by the foreign country, they are in fact paid by whoever is buying the imported good, and US businesses almost always pass most – or all – of that cost onto consumers. The North American car industry has operated for decades as if the continent is one giant country, thanks to free trade agreements signed by presidents from Bill Clinton to Trump himself. Parts and whole vehicles have flowed freely across borders, sometimes multiple times, before they end up in an American dealership.