United States President, Donald Trump, has unveiled a new 25% tariff on imported cars and auto parts, a move expected to escalate global trade tensions.
The new duties will take effect on April 2, with levies on vehicle imports beginning the following day, while tariffs on parts will be phased in from May.
Trump justified the decision as a catalyst for “tremendous growth” in the American auto sector, asserting that it would stimulate job creation and increased domestic investment.
However, industry experts warn that the tariffs could disrupt production lines, inflate car prices, and strain relations with key trade partners.
The US relies heavily on imported vehicles, bringing in around eight million cars annually, worth approximately $240 billion, accounting for nearly half of total car sales.
Mexico ranks as the top exporter of vehicles to the US, followed by South Korea, Japan, Canada, and Germany.
The tariff policy threatens to destabilize international supply chains and global car trade.
Many American automakers operate manufacturing plants in Mexico and Canada under longstanding trade agreements.
The White House clarified that the tariffs would apply to both complete vehicles and imported parts, which are frequently assembled into final products within the US.
However, components from Canada and Mexico are temporarily exempt as US Customs and Border Protection devises a system to enforce the new levies. Given the significant cross-border trade volumes, this exemption is crucial for both nations.
Following Trump’s announcement, General Motors’ stock fell by roughly 3%, triggering a broader sell-off in the auto sector, with Ford and other major players experiencing declines.
When asked if he might reconsider the policy, Trump firmly stated, “This is permanent,” adding, “If you build your car in the United States there is no tariff.”
The decision has already drawn reactions from key trade partners. Japanese Prime Minister Shigeru Ishiba vowed to explore “all options on the table” in response. Japan, home to automotive giants such as Toyota, Nissan, and Honda, is the world’s second-largest car exporter. Unsurprisingly, Japanese automakers saw their stock prices dip following the announcement.
Tariffs are government-imposed taxes on imports, paid by the importing businesses. Trump has aggressively used them as a tool to protect domestic industries and promote local manufacturing.
While they can provide a competitive edge to homegrown businesses, they also drive up costs for firms reliant on foreign-made components.
Analysts predict that the 25% tariff could increase vehicle costs by thousands of dollars. A study by the Anderson Economic Group estimates that duties on parts from Mexico and Canada alone could add between $4,000 and $10,000 to the price of a vehicle, depending on its model.
The car import tariffs coincide with a broader strategy of “reciprocal tariffs” that adjust duties based on the US’s trade relationships with individual countries. While the full impact of this policy shift remains uncertain, concerns are growing among global automakers and governments.
For instance, the UK, where Jaguar Land Rover considers the US its largest market, fears its car exports could be significantly impacted.
In 2024, the British manufacturer sold over 116,000 vehicles in the US, surpassing domestic sales in the UK and China. The UK government is currently in discussions with Washington, hoping to secure a trade agreement before the tariffs take effect, the BBC reports.
