During the 2024 presidential campaign Donald Trump repeatedly vowed to raise tariffs on automobiles imported into the U.S.
Imports were harming the domestic auto industry, other nations were limiting imports of American vehicles, and American workers and companies were getting hurt, he said.
Soon after he was inaugurated on Jan. 20, Trump started to threaten new tariffs on imports of just about everything: French wine, Canadian lumber and maple syrup, Mexican produce and the like.
Many tariff moves were dialed back in favor of more talks.
On Wednesday, March 26, he made good on his auto-tariffs vow. He said the U.S. would impose 25% tariffs on the value of all cars imported into the country.
The move affects all vehicles imported by European automakers especially hard, but it also applies to vehicles and parts built in Japan and South Korea.
And it affects vehicles and and parts built or manufactured in Canada and Mexico and shipped into the U.S., even if the products and vehicles were built by U.S.-based companies.
About 71% of cars coming into the U.S. come from Mexico, Japan, South Korea and Canada, according to USTradenumbers.com. Motor vehicles are the largest product category by dollar value.
Trump said that for Tesla, which is helmed by one of the president's closest advisers, Elon Musk, the tariffs would be "net neutral or maybe good."
Bloomberg reported that Tesla would have a leg up on competitors because the Austin electric-car producer "has large factories in California and Texas that churn out all the cars it sells in the U.S., insulating it to a greater degree from Trump’s new levies on auto imports and key components."
Higher prices for new and used cars in the offing
Analysts at Wedbush Securities described the auto-tariff announcement as a “hurricane-like headwind,” particularly for foreign automakers.
In a note late Wednesday, the investment firm predicted that the policy could push up the average car price between $5,000 and $10,000, The New York Times reported.
The president's order said the tariffs would start at 12:01 a.m. on April 3 and by no later than May 3. The order puts no end date on the tariffs. They will last until "they are expressly reduced, modified, or terminated," the order says.
That, in turn, would likely prompt retaliation against the U.S. by the European Union, Canada and Mexico.
Other than the Trump administration, no one was happy Wednesday evening. "I deeply regret the U.S. decision to impose tariffs on European automotive exports," said Ursula von der Leyden, president of the European Commission.
Mark Carney, the new prime minister of Canada, called the latest tariffs a “direct attack” on the country and Canadian auto workers. Ties between the two countries are "in the process of being broken" by Trump, he said, according to the Toronto Globe and Mail.
Carney warned that the new tariffs could substantially damage Canada’s auto sector, which is an integral part of the operations of U.S. makers. About 80% of Canadian auto production is exported to the U.S.
Carney, a former governor of both the Bank of Canada and the Bank of England, has called a snap election in Canada for April 28. He had succeeded Justin Trudeau as prime minister.
Before the Wednesday announcement, U.S. stocks tumbled after the White House announced that the order was coming.
On Wednesday the Standard & Poor's 500 Index fell 1.1% to 5,712. The Nasdaq Composite Index dropped 2% to 17,899, and the Dow Jones industrials dropped 0.3% to 42,455.
All three indexes are down for the year. The Nasdaq is off 7.3%. The S&P 500 is down 2.9%, and the Dow is down 0.2%.
Employees of German car maker Adam Opel GmbH work on a new Opel Insignia car in 2008 at a plant in Ruesselsheim, Germany. Opel, owned by General Motors, would still be subject to new U.S. tariffs.Ralph Orlowski/Getty Images
After Trump's announcement, early trading in stock index futures indicated that U.S. stocks would open lower on Thursday. By 2 a.m. EDT Thursday, however, the futures market had recovered its losses and was moving higher.
The big presence of vehicles built outside the U.S.
Nearly half of new passenger vehicles sold in the U.S. in 2024 were assembled outside the U.S., according to S&P Global Mobility.
Mexico is the biggest auto exporter to the U.S., sending pickups from General Motors, Ram (STLA) and Toyota as well as affordable sedans from Nissan (NSANY) and luxury models from BMW (BMWYY) and Volkswagen’s Audi.
European automakers — especially German automakers — are believed to be most vulnerable. Mercedes-Benz (MBGAF) , BMW and Volkswagen (VWAGY) are the biggest exporters the U.S.
The value of European-built vehicles brought to the U.S. was estimated at 34.8 billion euros ($36.7 billion). European companies sell about a quarter of their production in the U.S. Germany's three largest auto makers account for 73% of that total.
General Motors' (GM) total revenue in 2024 was $187.4 billion, including $13.6 billion in revenue for its giant financing arm. U.S. vehicle revenue was $140.5 billion, according to its 2024 annual report.
Toyota (TM) , Honda (HMC) , Nissan, Hyundai and others also have significant business and investments in the U.S.
In addition, GM, Ford Motor (F) and Chrysler, now a subsidiary of Stellantis, ships parts and vehicles into and out of the U.S. from and to Canada and Mexico.
