How Trump’s Tariffs Really ‘Work’
How Trump’s Tariffs Impact the Economy
How Trump s Tariffs Really Work - Amid a struggling job approval rating, President Trump has turned to recent business developments to bolster his economic narrative. A notable example is Toyota’s announcement of expanding truck production in Texas, which he framed as a victory for American manufacturing. However, this move serves more as a distraction from the broader consequences of his policies, particularly the surge in border taxes that have increased costs without delivering the promised manufacturing revival.
Toyota’s Investment and Job Creation
The Japanese automaker revealed plans to allocate $3.6 billion toward establishing a second assembly line at a new San Antonio plant, aiming to produce its Tacoma trucks. This shift means moving some production from Mexico to Texas, a decision that aligns with Trump’s pro-American manufacturing agenda. Yet, the rationale behind the move appears more tied to Texas’s business-friendly climate than to the tariffs themselves.
“Toyota is moving from Mexico to the United States (Texas!). A really big deal. Tariffs at work!”
While the President celebrated the relocation as a direct result of his tariffs, Toyota’s press release emphasized the state’s infrastructure and supportive policies, omitting any mention of Trump. The company cited “flexibility” and “advanced manufacturing technologies” as key factors, suggesting that higher labor costs in Texas might be offset by operational efficiencies.
Job Losses and Cost Increases
Despite Toyota’s decision, the broader effects of Trump’s tariffs are evident. Since early 2023, U.S. manufacturing jobs have been steadily declining, with over 75,000 lost by January 2025. Among these, 25,900 were in the motor vehicle and parts sector, though some losses are attributed to the transition to electric vehicles rather than tariffs alone.
The President’s Section 232 tariffs on autos and parts have cost the U.S. economy $35.2 billion through April of this year, while steel and aluminum tariffs added another $17.5 billion. These figures underscore the financial strain on domestic industries, even as Trump’s team argues that foreign companies bear the burden. In reality, U.S. firms, workers, and consumers are shouldering most of the expense.
Price Hikes and Dealer Adjustments
Auto tariffs on Canada and Mexico alone raised the cost of each U.S.-made car by approximately $1,600 last year. While manufacturers absorbed part of this burden, they passed on significant portions to customers. A March report from Cox Automotive revealed that the average retail price of new cars rose by 10.4%, with sticker prices increasing by $5,000 to $8,900 for imports and $1,600 to $2,000 for domestic models.
Auto dealers, many of which are small businesses, have absorbed about 4.5% of the price hikes. Yet, they have also seen job cuts, with 6,100 positions lost since Trump took office. Additionally, manufacturers like GM and Ford have introduced “destination fees” to manage costs, with GM raising fees on its Silverado trucks by 40%—a practice critics have dubbed “the Trump tax.”
Trade Uncertainty and Consumer Behavior
The uncertainty surrounding the extension of the USMCA trade pact has slowed business investments. Companies are hesitant to commit to long-term strategies without clarity on future tariffs and trade rules. This instability, combined with Trump’s fluctuating trade policies, has dampened economic performance compared to his first term.
As a result, consumers, particularly younger and middle-class Americans, are facing higher car prices and reduced affordability. Many are opting to keep older vehicles longer or purchase used models, contributing to a decline in new vehicle sales. This trend has seen sales average 15.9 million in the first half of 2025, down from 17 to 18 million in the pre-pandemic era. Fewer car purchases mean less demand for labor, further impacting the sector.