- President Trump on Wednesday said 25% tariffs on imported cars and car parts will go into effect on April 2.
- This will have an enormous impact on the auto industry, since roughly half of the cars sold here are assembled internationally.
- Trump hopes to spur U.S. manufacturing, but the duties will also make vehicles way more expensive for consumers.
President Donald Trump slapped fresh tariffs on the auto industry on Wednesday, in a move that will likely make cars more expensive and complicate the path forward for automakers already navigating a difficult transition away from combustion vehicles.
In an address from the Oval Office, Trump said the U.S. would impose new 25% tariffs on all vehicles imported from other countries on April 2. Roughly half of the approximately 16 million vehicles sold in America in 2024 were imported, according to S&P Global Mobility—primarily from Canada, Mexico, South Korea, Japan and Germany.
The tariffs will also apply to "key automobile parts" like engines, transmissions and electrical components, the White House said. That, too, will be devastating for America's auto manufacturers, given that roughly 60% of the parts in U.S.-made cars come from elsewhere.
Trump said the policy would push foreign and domestic automakers to build more of their vehicles in the U.S.
"And what that means is a lot of foreign car companies, a lot of companies, are going to be in great shape, because they've already built their plant, but their plants are underutilized, so they're able to expand them inexpensively and quickly," Trump said. "But others will come into our country and build, and they're already looking for sites."
Trump has twice postponed tariffs on vehicles imported from Canada and Mexico. Now those duties appear to be going into effect on a large scale and without exemptions. And this time, Trump says, they aren't going anywhere.
"This is permanent. 100%," he said, responding to a reporter who asked whether there's anything that would make him pull back the move.
Steep tariffs could push automakers to rejigger their supply chains. But they can't do so overnight; car plants require years of construction, billions of dollars in investment and a complex web of supplier relationships. So buckle up for your new car to get more expensive in the near term. Industry analysts and auto CEOs have warned that these tariffs—particularly the ones on Canada and Mexico—will completely upend the car industry. Analysts expect manufacturers to slash production, cutting the supply of new vehicles, and also to swiftly pass extra costs on to customers.
Tariffs on cars and parts from Mexico and Canada could add $3,000 to the cost of a U.S.-made vehicle and $6,000 or more to one assembled in Mexico or Canada, according to Cox Automotive.
"Over the longer-term, we expect sales to fall, new and used prices to increase, and some models to be eliminated if those tariffs persist," Jonathan Smoke, chief economist at Cox Automotive, said on a conference call Wednesday morning.
A trade group representing the U.S. operations of foreign automakers criticized the move, citing higher costs to consumers. Of course, these companies' profit margins are on the line too.
"The tariffs imposed today will make it more expensive to produce and sell cars in the United States, ultimately leading to higher prices, fewer options for consumers and fewer manufacturing jobs in the U.S.," Jennifer Safavian, president and CEO of Autos Drive America, said in a statement.
The move will likely exacerbate one of the biggest hurdles facing the shift to EVs: price. Surveys show that high upfront cost is one of the biggest deterrents keeping would-be electric-car buyers from taking the plunge.
It won't help that dozens of electric models, including ones sold by Detroit's Big Three, will be subject to the new tariffs. Those include the Chevrolet Equinox EV, Chevy Blazer EV and Honda Prologue, all popular models that are assembled at a General Motors plant in Mexico. The Ford Mustang Mach-E is also made south of the border. The Toyota bZ4X crossover is imported from Japan. The Hyundai Kona comes from South Korea. BMW's EVs are made in Germany. The Volvo EX30 is assembled in Belgium. And that's just a sampling.
Electric cars typically cost thousands more than combustion equivalents for a few reasons. Although battery costs have come down substantially over the last decade, EV battery packs are still costly. And many automakers have not hit the manufacturing scale necessary to make their investments in EVs pencil out. Even higher costs will likely slow down sales.
Tesla, notably, makes its U.S.-market vehicles domestically, along with EV startups Rivian and Lucid. And foreign manufacturers from Toyota and Honda to Volkswagen, BMW and Mercedes have been making cars in the U.S. for decades.
Auto companies have also been beefing up their manufacturing footprints in the U.S., in part due to policies in President Biden's Inflation Reduction Act that incentivize domestic production of batteries and clean vehicles. On Wednesday, Hyundai Motor Group officially opened its $7.6 billion Metaplant in Savannah, Georgia, where it builds the hot-selling Ioniq 5 electric crossover and that car's big sibling, the Ioniq 9 three-row SUV.
Got a tip about the EV world or policy? Contact the author: Tim.Levin@InsideEVs.com
