Trump's 25% tariffs on imported cars, parts expected to raise prices, rattle global trade, supply chains

By Dilara Zengin, Sevgi Ceren Gokkoyun, and Emir Yildirim

WASHINGTON/NEW YORK (AA) - US President Donald Trump announced new 25% tariffs on imported automobiles on Wednesday, a move expected to escalate tensions in global trade and lead to price hikes for end consumers.

The White House’s Fact Sheet stated that the 25% tariff will be applied to imported passenger vehicles (sedans, SUVs, crossovers, minivans, cargo vans), light trucks, and key automobile parts (engines, transmissions, powertrain parts, and electrical components), and also noted that additional parts could be subject to tariffs if necessary.

Trump’s auto tariffs were introduced ahead of reciprocal tariffs, which were scheduled for announcement on April 2, deemed by Trump as "Liberation Day."

The president said the tariffs will not affect cars produced in the country, while White House Staff Secretary Will Scharf said these tariffs will generate over $100 billion in annual revenue for the US.

The White House website states that companies importing cars to the US will have the opportunity to certify the components compliant with the US-Mexico-Canada Agreement (USMCA) in their vehicles and the tariff will only apply to “non-US content” in the vehicles.

The White House argued that US auto production has stagnated while foreign industries grew through "unfair subsidies and aggressive industrial policies."

“In 1985, American-owned facilities in the United States manufactured 11.0 million automobiles, representing 97% of overall domestic (American- and foreign-owned) production of automobiles,” according to the White House.

However, last year, Americans bought 16 million vehicles, with 50% of them being imported, while the US ran a $93.5 billion deficit in auto parts trade.

As of last year, about 553,300 people were employed in auto parts production, down 34% since 2000.

The US Department of Commerce reported that US auto exports totaled $56.7 billion, while imports reached $243.5 billion in 2024. Most car imports came from Mexico, accounting for $78.5 billion (32.2% of total automobile imports).

Japan made up 16.3% of US auto imports at $39.73 billion, while US auto imports from South Korea reached $36.64 billion, followed by Canada at $31.16 billion, Germany at $24.78 billion, the UK at $8.19 billion, Slovakia at $6.25 billion, Sweden at $8.36 billion, Italy at $3.33 billion, and China at $2.55 billion.

Nearly half of all vehicles sold in the US are imported, and almost 60% of the parts in vehicles assembled in the US are imported, according to Wall Street researcher Bernstein.

- Trump’s tariffs to bump up car prices

Trump’s tariffs on the auto industry are expected to disrupt operations for automakers in North America, where the supply chain is deeply integrated. Experts predict that these tariffs will further escalate trade tensions with major US trade partners.

Cox Automotive’s analysis showed that almost all vehicle production in North America will be disrupted by mid-April if these tariffs go into effect, leading to 20,000 fewer units produced per day, accounting for about a 30% decline.

Concerns are rising that the tariffs could exacerbate inflationary pressures, resulting in higher car prices for US consumers.

Tariffs on Mexico and Canada could boost car prices up to by $12,200, according to the Anderson Economic Group.

Products compliant with the USMCA, including automobiles, had been exempted from these tariffs until April 2.

This week, Trump announced that South Korean automaker Hyundai would invest $5.8 billion in US manufacturing as part of a $21 billion investment over the coming years. Trump hailed this as evidence of the tariffs’ success in bringing production back to the US, claiming US consumers would not bear the cost of the tariffs.

Carmaker Stellantis also announced a $5 billion investment in the US to boost domestic production. Trump noted that other companies, including Volkswagen, Honda, Nissan, Rolls-Royce, and Volvo, have plans to either increase US production or shift their operations to the country.

- Automakers’ stocks decline amid Trump’s tariffs

Although Trump’s tariffs were announced after markets closed, automaker stocks took a hit.

Shares of US-based General Motors fell by 3%, while Stellantis saw a 3.5% decline.

Billionaire Elon Musk’s Tesla shares have dropped over 30% since the beginning of the year despite Trump’s victory in the presidential elections. Tesla shares also plunged 5.5% following Trump’s tariff announcement.