Ford CEO does the math on Trump's auto tariffs

Summary

Consider This from NPR: Ford CEO Does the Math on Trump's Auto Tariffs

Release Date: May 1, 2025

In this episode of NPR's Consider This, the hosts delve into the implications of President Trump's auto tariffs on the American automotive industry, focusing particularly on Ford Motor Company and its CEO, Jim Farley. The discussion explores the immediate consumer reactions, the strategic adjustments by automakers, and the broader economic consequences of the tariffs.

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1. Surge in Car Sales Amid Tariff Uncertainty

The episode opens by highlighting a notable uptick in new vehicle sales following President Trump's announcement of upcoming auto tariffs in March. Market research from Cox Automotive indicates that Americans are flocking to car dealerships, driven by fears of impending price increases.

Kira Nay, a children's librarian from Ohio, exemplifies this trend. She explains how the uncertainty surrounding the tariffs prompted her and her husband to accelerate their plans to purchase a larger vehicle sooner than intended:

“We just decided that we couldn't wait any longer.”
(Timestamp: 00:45)

Experts concur that if the tariffs remain in place, the likelihood of price hikes in the summer and fall is high, making this a strategic gamble by the Trump administration aimed at boosting domestic car production.

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2. President Trump's Tariff Strategy and Goals

President Trump articulated his vision for the auto industry, emphasizing the need to reduce reliance on imported vehicles and parts. His remarks underline a commitment to manufacturing cars and their components within the United States to create more American jobs.

“We don't need the cars from outside. When they say, oh, sir, we want to send you a lot of cars, I said, we really don't want your cars. We really don't want. We want to make our own cars.”
(Timestamp: 01:51)

Despite initial strictness, Trump recently adjusted his tariff approach, providing automakers a temporary reprieve to adapt their production strategies:

“They took in parts from all over the world. I don't want that. I want them to make their parts here, but I gave them a little bit of time.”
(Timestamp: 02:39)

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3. Ford's Strategic Response Under Jim Farley

Jim Farley, CEO of Ford Motor Company, offers an in-depth perspective on how the tariffs are impacting the company and the broader automotive landscape. Speaking from a Ford truck plant in Louisville, Kentucky, Farley emphasizes Ford's predominantly domestic production approach.

“Ford is the most American company. We make 80% of what we sell in the US here.”
(Timestamp: 03:15)

Farley explains that while Ford already manufactures a significant portion of its vehicles domestically, the tariffs pose a substantial challenge by potentially increasing production costs. He discusses Ford's efforts to localize parts sourcing, currently achieving about 75% localization through USMCA-compliant suppliers in Mexico and Canada:

“75% of the parts either come from the US or have a lot of US content as part of that.”
(Timestamp: 04:02)

4. Navigating Uncertainty and Pricing Pressures

The fluctuating nature of the tariffs introduces considerable uncertainty for Ford and its competitors. Farley highlights the delicate balance between maintaining affordability for consumers and adhering to the administration's push for domestic production.

“It's a balance between affordability and making 100% of the parts here or keeping as is.”
(Timestamp: 05:35)

When probed about the inevitability of car prices rising, Farley remains cautious, acknowledging that while price increases are likely for imported vehicles due to tariffs, Ford's limited reliance on imports may shield it to some extent:

“I think it's inconceivable to say that car prices won't go up.”
(Timestamp: 06:15)

However, he notes that Ford is taking proactive measures to mitigate immediate impacts by extending employee pricing through July 4th, providing some stability for consumers during this uncertain period:

“We want to enter this period of uncertainty by reassuring Americans, if you buy a Ford, you don't have to worry about that at least through July 4th.”
(Timestamp: 07:45)

5. Future Outlook and Job Creation

Looking ahead, Farley discusses Ford's plans to expand its hybrid and electric vehicle lineup, anticipating that the tariffs will enhance Ford's competitive position by leveling the playing field with overseas manufacturers. He remains optimistic about the long-term benefits of the tariffs in creating high-quality American jobs:

“We built 80% in the US and we had much higher costs than our competitors importing overseas. Well, that will start to change now and I believe in Ford's case, this is a pretty big opportunity for us.”
(Timestamp: 08:34)

Farley also touches on his interactions with President Trump, reaffirming the administration's dedication to job creation while emphasizing the need for a balanced approach to maintain affordability:

“There's a balancing act between affordability and these great jobs.”
(Timestamp: 09:43)

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6. Conclusion: Balancing Act Between Jobs and Affordability

The episode concludes by underscoring the complexity of the tariff-induced changes within the automotive industry. While the push for domestic production aims to bolster American employment, it also presents challenges in managing production costs and maintaining vehicle affordability for consumers. Ford, as articulated by Jim Farley, stands at a pivotal juncture, striving to navigate these dynamics while positioning itself for future growth.

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This comprehensive analysis by NPR's Consider This offers listeners an insightful exploration of the intersection between government policy, corporate strategy, and consumer behavior within the context of the automotive sector's evolving landscape.

Transcript

[Juana Summers]

Hey, it's Juana Summers. A quick note before we start the show. When you listen to Consider this and anything else from the NPR network, you're listening to public media, meaning it serves the public with nonprofit, independent journalism, the shows you love and the conversations that keep you company. There are a whole lot of ways to get your news, but public media is unique. It is accountable to you, freely accessible and full of voices and stories you cannot find anywhere else. Today marks the start of Public Media Giving Days. When you give, it's more than a donation. It is a declaration that public media is a vital resource worth sustaining. If you don't give already, this is the time. Visit donate.NPR.org thank you. Americans are rushing to car dealerships as they worry about what President Trump's tariffs will do to car prices in the coming months. New vehicle sales have been increasing steadily this year, and they jumped in March, according to market research firm Cox Automotive. That's the month when President Trump announced upcoming auto tariffs. Here's Kira Nay, a children's librarian in Ohio. She wanted to swap her 2008 Toyota for something bigger. She and her husband were hoping to put off that purchase till next year. But with the tariffs and so much of the uncertainty about that, we just decided that we couldn't wait any longer. Nay told our colleague Camila Dominoski that when her family headed out to a car lot in March, they realized maybe they weren't the only ones. The dealership was packed. Kira Nay and other shoppers are racing to buy cars this spring because they believe that prices are going to go up in the summer and fall. And experts say if tariffs remain in place, that's likely. It's a gamble President Trump is making with the hope that his tariff strategy will lead domestic car companies to make more vehicles at home.

[President Trump]

We don't need the cars from outside. When they say, oh, sir, we want to send you a lot of cars, I said, we really don't want your cars. We really don't want. We want to make our own cars.

[Juana Summers]

Consider this. President Trump says moving auto production to the US Will create jobs for Americans. But that has put automakers in a bind because covering the costs of manufacturing cars here could mean raising prices for consumers. From npr, I'm Juana Summers. It's Consider this from npr. President Trump tweaked his tariff strategy this week, giving automakers some reprieve as they work to shift production to the US.

[President Trump]

They took in parts from all over the world. I don't want that. I want them to make their parts here, but I gave them a little bit of time.

[Juana Summers]

Ford Motor Company CEO Jim Farley welcomed that move, but he also acknowledged that the tariffs are creating a lot of uncertainty for the industry and for consumers. Farley spoke to my co host Mary Louise Kelly earlier this week, calling in from a truck plant in Louisville, Kentucky.

[Mary Louise Kelly]

Well, I want to ask you more about the plan in a second, but let's just go straight to the news of President Trump saying he will walk back some tariffs. You put out a statement welcoming the move. Just briefly explain why.

[Jim Farley]

Well, Ford is the most American company. We make 80% of what we sell in the US here. And so the tariffs for us are a bit different than the industry. The US industry is about 17 million units and 8 million of that, about half are imported through ports around the country and half is built in the US So the tariffs will have a really big impact on our industry because 25% cost increase for 50% of the vehicles sold in America.

[Mary Louise Kelly]

So you're saying Ford already makes 80% of your cars in the U.S. that's more than any other U.S. automaker. I want to ask about the parts though, because a lot of the parts you use to build those cars do come from other countries, Mexico and so on. Will you be shifting to US Based suppliers?

[Jim Farley]

Juan Average our localization of the parts, as you said, is around 75%. That's either USMCA compliant parts coming from Mexico or Canada. During Trump 1, we negotiated USMCA where even a part made in Mexico could have a lot of US content in it. So the 75% I mentioned is visualized in F150, 75% of the parts either come from the US about half and the rest are coming from those other countries, but they have a lot of US Content as part of that.

[Mary Louise Kelly]

But I guess the central question here if the administration's stated goal with easing these tariffs for now is to give automakers like you time to shift production, how do you decide whether or not to do so when the tariffs themselves are a moving target, when President Trump may change his mind again in two days?

[Jim Farley]

So what the Trump administration did yesterday to make it simple is they gave all the automakers, Ford's in a different spot, as I said, about a 15% leeway on parts that are non USMCA or non US so they're giving us kind of an exemption for carpets, washers, fasteners, wiring, looms, stuff that honestly we can't even get in the US and, and also stuff that frankly, if we made here, it would make the car a couple thousand dollars more expensive, which is too expensive for what we think. So.

[Mary Louise Kelly]

So does that stuff stay overseas? You'll continue getting that from overseas?

[Jim Farley]

No, I mean, we'll continue to do the math and aggressively move localization. But the one thing we have to balance is affordability. The F150 is $800 a month already is America's best selling vehicle. Do we want to make that $850 a month? You know, that's the balance between A4 affordability and making 100% of the parts here or, you know, keeping as as is.

[Mary Louise Kelly]

I nodded to the big question on a lot of ordinary Americans minds. Are the prices of our cars about to go up? Will prices still have to go up? Even with this, at least for now, scaling back of some of the tariffs.

[Jim Farley]

I think it's inconceivable to say that car prices won't go up. Why? 50% of all vehicles bought by Americans are imported. And those imported cars will get a 25% tariff. Now that is literally 5 to $10,000 a vehicle. So for the importers, and actually some of those companies are local companies, you know, some of our competitors that are domiciled in the US and they have big decisions to make because their tariff bill will be very large compared to Ford.

[Mary Louise Kelly]

And how about it for you?

[Jim Farley]

At Ford, we only import about 10%, something like that. And so for us, we have 6 to 10% margins, 25% tariff on the parts that we don't build in here. Like 20% of our vehicles, you know, is billions. But we can offset that. And it depends how our competitors act. Will the overseas importers, you know, increase prices and allow us to gain market share and therefore, you know, build even more here and be able to more than offset that in terms of the pricing we would have to take. I don't know. It will all come down to this summer when those increased prices may or may not happen. And for deciding what do we do about that competitive dynamic?

[Mary Louise Kelly]

So I'm trying to pin you down on this. If the basic question is are Ford prices going to go up? It sounds like the answer is we don't quite know yet. Because there's so much uncertainty in your industry.

[Jim Farley]

I would say that's the right answer. You know, we announced today, actually I can announce it right now that we're extending employee pricing through July 4th. We want to enter this period of uncertainty by reassuring Americans, if you buy a Ford, you don't have to worry about that at least through July 4th.

[Mary Louise Kelly]

And I mean, I can hear the factory floor and the supply line behind you. Just paint me a picture of a year from now how different things might look. Because I'm wondering if you're looking at, for example, jobs. Another stated goal of these tariffs is to provide jobs for American workers. Won't a lot of the work say at the Kentucky plant where you were speaking with us from already be automated robots, be AI a year from now?

[Jim Farley]

I don't know what's going to happen, but I will know what's happening. At Ford, we're building two brand new plants for expand our hybrid and electric lineup. I think that Ford, because of the tariffs were the best position for many years. We built 80% in the US and we had much higher costs than our competitors importing overseas. Well, that will start to change now and I believe in Ford's case, this is a pretty big opportunity for us.

[Mary Louise Kelly]

Last thing, Mr. Farley, I know that you have spoken directly to the President about these tariffs. What did you learn from those conversations?

[Jim Farley]

Well, what I learned is that I think he is very committed to building more jobs like these in America. I mean, these are the best of the best, you know, hourly jobs you can find in America. He's very committed to that. But I think, you know, the issue that we all have to work through together is how fast can that change and what will be the pricing and the affordability that we can manage through that transition.

[Mary Louise Kelly]

Would more predictability be useful for your business?

[Jim Farley]

Well, sure. Cost increases are not great for any industrial company. On the other hand, we have committed to the U.S. we want to expand ban jobs in the U.S. and so it's a balancing act between affordability and these great jobs. And I think I would just say there's no quick answer here. This is a long term policy change and we have to work together through it. Even the most American companies like Ford.

[Juana Summers]

That was Ford CEO Jim Farley speaking from a truck plant in Kentucky to my co host Mary Louise Kelly. And a point of clarification, Jim Farley said about half of the F150's parts come from the US it's actually closer to 60% according to Ford. This episode was produced by Alejandra Marquez Hanse with audio engineering by Simon Laszlo Jansen. It was edited by John Ketchum and Sarah Handel with help from Camila Dominosky. Our executive producer is Sammy Yenigun. It's consider this from npr. I'm Juana Summers.

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