Tariffs on car parts cost US firms billions more than tariffs on cars

New research shows that taxing imported car parts, not just finished cars, hurts American car companies. This means companies that rely on foreign parts lose money, while those using domestic parts can actually profit from the tariffs.

For years, policymakers assumed tariffs on imported cars would help domestic manufacturers. This study shows that taxing the parts used to build cars fundamentally changes the outcome. Companies that import more parts lose money, while those that source domestically gain. This suggests that the location of final assembly is less important than the location of the entire supply chain when it comes to the impact of trade policy.