UNITED STATES President Donald Trump said Wednesday he was placing 25% tariffs on auto imports, a move the White House claims would foster domestic manufacturing but could also put a financial squeeze on automakers that depend on global supply chains.
“This will continue to spur growth,” Trump told reporters. “We’ll effectively be charging a 25% tariff.”
AP reported today that the tariffs, which the White House expects to raise US$100 billion in revenue annually, could be complicated as even U.S. automakers source their components from around the world.
The tax hike starting in April means automakers could face higher costs and lower sales, though
Trump argues that the tariffs will lead to more factories opening in the United States and the end of what he judges to be a “ridiculous” supply chain in which auto parts and finished vehicles are manufactured across the United States, Canada and Mexico.
To underscore his seriousness about the tariffs directive he signed, Trump said, “This is permanent.”
Shares in General Motors fell roughly 3% in Wednesday trading. Ford’s stock was up slightly. Shares in Stellantis, the owner of Jeep and Chrysler, dropped nearly 3.6%.
Trump has long said that tariffs against auto imports would be a defining policy of his presidency, betting that the costs created by the taxes would cause more production to relocate to the United States while helping narrow the budget deficit.
But U.S. and foreign automakers have plants around the world to accommodate global sales while maintaining competitive prices — and it could take years for companies to design, build and open the new factories that Trump is promising.
“We’re looking at much higher vehicle prices,” said economist Mary Lovely, senior fellow at the Peterson Institute for International Economics. “We’re going to see reduced choice. ... These kinds of taxes fall more heavily on the middle and working class.’’
She said more households will be priced out of the new car market — where prices already average about US$49,000 — and will have to hang on to aging vehicles.
The tariffs on autos would start being collected on April 3, Trump said. If the taxes are fully passed onto consumers, the average auto price on an imported vehicle could jump by $12,500, a sum that could feed into overall inflation. Trump was voted back into the White House last year because voters believed he could bring down prices.
Foreign leaders were quick to criticise the tariffs, a sign that Trump could be intensifying a broader trade war that could damage growth worldwide.
“This is a very direct attack,” Canadian Prime Minister Mark Carney said. “We will defend our workers. We will defend our companies. We will defend our country.”
In Brussels, European Commission President Ursula von der Leyen expressed regret at the U.S. decision to target auto exports from Europe and vowed that the bloc would protect consumers and businesses.
“Tariffs are taxes — bad for businesses, worse for consumers equally in the U.S. and the European Union,” she said in a statement, adding that the EU’s executive branch would assess the impact of the move, as well as other U.S. tariffs planned for coming days.
As Trump announced the new tariffs, he indicated that he would like to provide a new incentive to help car buyers by allowing them to deduct from their federal income taxes the interest paid on auto loans, so long as their vehicles were made in America.
That deduction would eat into some of the revenues that could be generated by the tariffs.
The new tariffs would apply to both finished autos and parts used in the vehicles, according to a White House official who spoke on condition of anonymity to discuss the taxes on a call with reporters.
The tariffs would be on top of any existing taxes and were legally based on a 2019 Commerce Department investigation that occurred during Trump’s first term on national security grounds.
For autos and parts under the USMCA trade pact applying to the United States, Mexico and Canada, the 25% tariffs would only apply to non-U.S. content.
The administration is reasoning that there is excess capacity at U.S. automakers that will enable them to ramp up production to avoid the tariffs by manufacturing more domestically, with the official noting that automakers have known since the Trump campaign that tariffs were coming.
The auto tariffs are part of a broader reshaping of global relations by Trump, who plans to impose what he calls “reciprocal” taxes on April 2 that would match the tariffs, sales taxes charged by other nations. – March 27, 2025
