Tariffs are starting to show up in car prices

Summary

Marketplace Morning Report Summary Episode: Tariffs are Starting to Show Up in Car Prices
Release Date: May 20, 2025
Host: Sabri Benishore

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1. Tariffs Impacting the Automotive Industry

In this episode, Sabri Benishore delves into how recent tariffs are affecting the automotive sector. Higher tariffs have led to tangible increases in vehicle prices, with Subaru leading the charge by adjusting its pricing to mitigate the additional costs. As Nova Safo reports:

[01:30] "Japanese automaker Subaru says it's adjusting its pricing to offset increased costs. Price hikes are reportedly as high as $2,000 on some models."

General Motors (GM) has also responded by freezing shipments to China, a significant move given the size of the Chinese market for US automakers. This decision comes despite an ongoing trade truce that initially introduced steep tariffs. Benishore highlights the financial strain on major manufacturers:

[01:50] "GM alone said tariffs would cost the company as much as $5 billion this year. Ford pegged the number at $2.5 billion and is said to have already hiked prices on some models."

Trade negotiations between the US and Japan appear sluggish, with little progress being made. Nova Safo adds:

[01:40] "Japan's top negotiator says the country is maintaining a key that the US eliminate tariffs on Japanese goods, not just reduce them."

2. Signs of an Economic Slowdown

The report transitions to broader economic indicators signaling a potential slowdown. Mitchell Hartman discusses the Leading Economic Index (LEI), a composite of various economic metrics:

[02:25] "The leading economic index fell by a full percent, the biggest drop in more than two years, and almost as much as the month before."

The Conference Board forecasts a significant reduction in US economic growth:

[02:35] "The Conference Board is predicting growth in the US economy will drop from 2.8% in 2024 to 1.6% this year."

Key components contributing to this downturn include declines in finance, labor, manufacturing, and construction. Justina Jabinska Lamonika elaborates:

[02:56] "In April, most of those measures were declining, including tariffs and the inflation that could result."

Consumer sentiment is also waning, with concerns over personal financial stability and rising unemployment expectations:

[03:31] "Two-thirds of consumers are expecting unemployment rates to go up. The strong incomes that supported consumer spending after the pandemic, that's just not the case anymore."

3. Japan’s Steel Industry and International Trade

The episode touches on Japan's ambition to expand its steel industry within the US market. Sabri Benishore reports on Nippon Steel's attempt to acquire US-based cP Steel:

[03:50] "Japan's biggest steel maker, Nippon Steel, is not giving up on trying to acquire U.S. cP Steel. It's offering $14 billion, including $4 billion for a new steel mill in the U.S."

However, the Trump administration is scrutinizing this deal, potentially delaying its progression.

4. Innovations in High-Speed Rail: Private Sector Initiatives

Shifting focus to infrastructure, Benishore covers the ongoing challenges and new proposals for connecting the Bay Area and Los Angeles via high-speed rail. Traditional high-speed rail projects have faced delays and budget overruns, further complicated by President Donald Trump's threats to withdraw federal funding.

Amid these challenges, private companies like Dreamstar Lines are exploring alternative solutions. Joshua Dominic, CEO of Dreamstar Lines, proposes the introduction of overnight sleeper trains as a cost-effective and efficient mode of transportation:

[05:49] "The idea is to offer something like a hotel on wheels. An overnight sleeper train allows you to board the train in the evening, sleep overnight, and wake up in the morning in your destination refreshed."

This concept mirrors successful models in Europe and existing Amtrak services in the US. However, Dominic acknowledges significant hurdles:

[07:41] "The challenge is actually making money on this. The biggest private passenger rail company in the US, Brightline, runs a train in Florida but also owns a lot of real estate around its station. Those developments have bolstered the company's finances, but the overnight startups don't have real estate portfolios to draw from."

Robert Puentes from the Brookings Institution comments on the viability of such ventures:

[07:00] "If you're saving money on a hotel, if you're traveling at night when there's theoretically very little traffic, it's a very intriguing idea."

Despite these promising aspects, obtaining sufficient investment and overcoming logistical challenges remain critical for the success of private sleeper train initiatives.

5. Concluding Insights

The episode underscores the interconnectedness of international trade policies, economic indicators, and innovative infrastructure projects. As tariffs reshape the automotive landscape and economic signals hint at a slowdown, new ventures in transportation may offer alternative pathways for growth and efficiency. However, the success of these initiatives will largely depend on strategic investments and the ability to navigate complex economic terrains.

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Produced by Ariana Rosas and Erica Soderstrom, Senior Producer Alex Schroeder, and Supervisory Senior Producer Meredith Garretson Morby.

Transcript

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[Sabri Benishore]

Tariffs are starting to show up in car prices From Marketplace, I'm Sabri Benishore, in for David Brancaccio. Higher tariffs are not working out so well for automakers. Subaru is raising prices. GM is reportedly freezing shipments to China Merrimack. Meanwhile, trade talks between the US And Japan, which is home to Toyota, Honda and others, look to be moving slowly at best. Marketplace's NovaSafo has an update.

[Nova Safo]

Analysts expected new tariffs, including on steel and aluminum and foreign made vehicles, to push up prices. Now Japanese automaker Subaru says it's adjusting its pricing to offset increased costs. Price hikes are reportedly as high as $2,000 on some models. Meanwhile, Reuters says GM is halting shipments from the US to China despite a trade truce that brought sky high tariffs. Down but not out. GM alone said tariffs would cost the company as much as $5 billion this year. Ford pegged the number at 2.5 billion and is said to have already hiked prices on some models. Meanwhile, Japan, which the Trump administration previously singled out as a country eager to make a trade deal, appears to actually be in no hurry. Its top negotiator says the country is maintaining a key that the US Eliminate tariffs on Japanese goods, not not just reduce them. I'm Nova Safo for Marketplace.

[Sabri Benishore]

New data is flashing warning signs of an economic slowdown, but not a full blown recession yet. The leading economic index is like a combo platter of economic indicators put up by the Conference board. It fell by a full percent, the biggest drop in more than two years fell by almost as much the month before, too. The Conference Board is predicting growth in the US economy will drop from 2.8% in 2024 to 1.6% this year. Marketplace's Mitchell Hart the leading economic index.

[Justina Jabinska Lamonika]

Crunches together 10 components on finance, labor, manufacturing and construction. And in April, most of those measures were declining, including, says Justina Jabinska Lamonika at the Conference Board.

[Joshua Dominic]

Building permits plummeted in April. The builders they're not keen to start any new construction, considering the current uncertainty.

[Justina Jabinska Lamonika]

About tariffs and the inflation that could result. The sharpest declines in the April Lei were clocked for stock prices and consumer expectations. Joanne Hsu directs the University of Michigan Consumer Surveys.

[Mitchell Hartman]

We already have consumers telling us that their incomes are weakening. Two thirds of consumers expecting unemployment rates to go up. And so the strong incomes that supported consumer spending after the pandemic, that's just not the case anymore, xu says.

[Justina Jabinska Lamonika]

Consumers are worried about future instability in their personal finances. I'm Mitchell Hartman for Marketplace.

[Sabri Benishore]

Japan's biggest steel maker, Nippon Steel, is not giving up on trying to acquire U.S. cP Steel. It's offering $14 billion, including 4 billion for a new steel mill in the U.S. this is according to Reuters. The Trump administration is reviewing that deal.

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[Odoo Representative]

Some say Odoo business management software is like fertilizer because of the way it promotes growth. Some say Odoo is like a magic beanstalk scaling with you while being magically affordable. And some say Odoo's programs for manufacturing, accounting and more are like building blocks for creating a custom software suite. But I say Odoo is all of it. Fertilizer. Magic beanstalk building blocks for business. Yeah, Odoo. Exactly what every business needs. Sign [e-mail] that's o-o o.com.

[Sabri Benishore]

There is a plan to connect the Bay Area and Los Angeles by high speed rail trains that go more than 200 miles an hour. It is years away and billions of dollars over budget. And President Donald Trump's recent threat to pull federal funding from the effort could slow it down even more. But a private company thinks there is another way to link the two cities by rail. Slow moving sleeper trains, Marketplace's Henry up reports.

[Joshua Dominic]

The idea is to offer something like a hotel on wheels, says Joshua Dominic, the CEO of a startup called Dreamstar Lines. An overnight sleeper train allows you to board the train in the evening, sleep overnight and wake up in the morning in your destination refreshed. A more comfortable red eye, he says, complete with beds and showers on board. Overnight trains are seeing something of a revival in Europe. Both private and public rail companies have expanded service there in recent years, and Amtrak already offers sleeper compartments for long distance trains in the US Say New York to Chicago. But Dominic thinks there's an opportunity for the private sector, too, running sleeper trains on existing freight rail tracks. We can use some of the capacity that currently exists in America's rail infrastructure that's just being really underutilized and making it more useful. His first target is between San Francisco and la. He's already negotiating with Union Pacific to use the freight company's tracks. And Dreamstar isn't the only company pursuing this idea. Another Philadelphia based Luna Train, has proposed a network of sleeper lines in the east and Midwest. The company declined an interview request. Robert Puentes at the Brookings Institution says these companies could be onto something.

[Robert Puentes]

If you're saving money on a hotel, if you're traveling at night when there's theoretically very little traffic, it's a very intriguing idea.

[Joshua Dominic]

The challenge, he says, is actually making money on this. The biggest private passenger rail company in the US right now, called Brightline, runs a train in Florida but also owns a lot of real estate around its station. Those developments have bolstered the company's finances, Puentes says, but the overnight startups don't have real estate portfolios to draw from.

[Robert Puentes]

The idea of actually providing service and then making money off of just passenger fares is a very interesting one and intriguing one, thinking, well, how high do the fares have to be in order for them to generate returns?

[Joshua Dominic]

Joshua Dominic at Dreamstar says he intends for his sleeper train fares to be comparable to the cost of a flight plus a hotel room. The other challenge is getting the trains themselves, says Sean Jeans Gale at the Rail Passengers Association.

[Justina Jabinska Lamonika]

Right now you're looking at a 10 to 12 year lead time from when you order the equipment to when it rolls off the manufacturing line and is ready to go into revenue service.

[Joshua Dominic]

Dreamstar's Joshua Dominic says he's identified used trains that his company could retrofit but declined to offer any more specifics, and he says he has private investors lined up to back his company. The goal? Have sleeper trains running between LA and the Bay Area by the 2028 Olympics and within a few decades, he says, a network of them across the country. I'm Henry Epp for Marketplace.

[Sabri Benishore]

Our producers are Ariana Rosas and Erica Soderstrom. Our senior producer is Alex Schroeder. Our supervisory senior producer is Meredith Garretson Morby. And I'm Sabri Benishore with the Marketplace Morning Report from APM American Public Media.

[Mitchell Hartman]

Can we invest our way out of the climate crisis? Five years ago it seemed like Wall street was working on it until a backlash upended everything.

[Nova Safo]

So there's a lot of alignment between the dark money right and the oil industry on this effort.

[Mitchell Hartman]

I'm Amy Scott, host of How We Survive, a podcast from Marketplace. In this season, we investigate the rise, fall and reincarnation of change, climate, climate conscious investing. Listen to How We Survive. Wherever you get your podcasts.