An employee uses a flash grinder to smooth out the frame of a sports utility vehicle at the General Motors assembly plant in Arlington, Texas.

The proposed U.S. tariffs on car imports will have far reaching negative implications for the whole auto industry, according to Moody’s Investors Service.

The research firm said higher tariffs will cause problems across the car industry’s global supply chain.

“Tariffs on imported cars, parts would be broadly credit negative for industry,” Moody’s said in a note to clients Monday. “A 25% tariff on imported vehicles and parts would be negative for nearly every segment of the auto industry — carmakers, parts suppliers, car dealers, and transportation companies … Should any tariffs be levied, carmakers would need to absorb the cost to protect sales volumes while hurting profitability; increase prices to pass the tariff costs to customers, which could hurt sales; or a combination of both.”

President Donald Trump threatened a 20 percent tariff on auto imports from the European Union last week.

Tweet Link

“Based on the Tariffs and Trade Barriers long placed on the U.S. & its great companies and workers by the European Union, if these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the U.S. Build them here!” he tweeted on Friday.

As part of tariffs expected to go online July 6, the administration also has put a 25 percent tariff on Chinese goods including autos.