WASHINGTON - US automakers and their global rivals have been rocked by President Donald Trump’s announcement that he would impose 25% tariffs on all vehicles as well as many foreign-made auto parts imported into the United States.
The new levies, if kept for an extended period, could add thousands of dollars to the cost of an average US vehicle purchase and impede car production across North America.
That will be because of the intertwined manufacturing operations developed by carmakers across Canada, Mexico and the United States over the last three decades.
Nearly half of all cars sold in the United States last year were imported, the research firm GlobalData says.
Thailand exported 42,000 passenger cars to the United States in 2024, along with about $4 billion worth of parts. Producers have been warned to brace for turbulence as the new tariffs take effect.
The proclamation signed by Trump expands a trade war designed to bring more manufacturing jobs to the US and setting the stage for an even broader push on levies next week.
“We’re going to charge countries for doing business in our country and taking our jobs, taking our wealth, taking a lot of things that they’ve been taking over the years,” Trump said at the White House on Wednesday.
The automobile tariffs would be collected starting at 12.01am Washington time on April 3.
The White House said tariffs would apply not only to fully assembled cars but key parts, including engines, transmissions, powertrain parts and electrical components. The tariffs on parts will take effect no later than May 3, according to the proclamation. That list could also expand over time to encompass additional parts.
Importers of automobiles under the US-Mexico-Canada Agreement (USMCA) will get the chance to certify their US content so that only non-US content is taxed, the White House said.
Trump cast the tariffs as “permanent” and said he was not interested in negotiating any exceptions. Shares of General Motors plunged 8% while Ford and Stellantis dropped 4.5% in after-hours trading as Trump spoke. Asian carmakers declined by 3-4%, led by Toyota, in early trade on Thursday.
Shares in Tesla, which makes all the cars sold in the United States locally but with some imported parts, were down 1.3%.
Trump said the duties announced on Wednesday could be net neutral or even good for Tesla, adding that its CEO, and his close ally, Elon Musk, did not advise him regarding auto tariffs.
In a post on X, Musk acknowledged the tariffs would also affect Tesla.
“This will affect the price of parts in Tesla cars that come from other countries,” he wrote. “The cost impact is not trivial.”
Trump’s tariffs and threats to impose them have sowed uncertainty in businesses and roiled global markets since he returned to the White House in January.
On Wednesday, Trump reiterated that he expected the auto tariffs to prompt automakers to boost investment in the United States, instead of Canada or Mexico.
Autos Drive America, a group representing major foreign automakers such as Honda, Hyundai, Toyota and Volkswagen, said 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 US”.
Automakers in North America have largely enjoyed free trade status since 1994. The USMCA, which Trump introduced in 2020, imposed new rules designed to spur regional content production.
After clamping tariffs of 25% on Mexico and Canada in early March, Trump allowed a one-month reprieve for vehicles produced in compliance with the terms of his USMCA, which benefited American companies.
The new rules do not extend that reprieve.
“Companies that have invested hundreds of millions and billions of dollars on plants in Canada and Mexico will likely see their profits cut dramatically over the next few quarters, if not into a couple years,” said Sam Fiorani, an analyst at AutoForecast Solutions.
“We’re going to look at adjusting our sales and production forecasts because this will throw everything into chaos.”
Before the announcement of the new tariffs, Cox Automotive, an automotive services provider, predicted they would add $3,000 to the cost of a US-made vehicle and $6,000 on vehicles made in Canada or Mexico, without exemptions.
If tariffs go through, by mid-April Cox expects disruption to “virtually all” North American vehicle output, leading to 20,000 fewer vehicles a day, or a hit of about 30% to production.
The United Auto Workers union, which represents factory workers at Big Three Detroit automakers, praised Trump’s action.
“With these tariffs, thousands of good-paying blue collar auto jobs could be brought back to working-class communities across the United States within a matter of months, simply by adding additional shifts or lines in a number of underutilised auto plants,” UAW president Shawn Fain said in a statement.
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