New York – President Donald Trump announced significant 25% tariffs on all cars shipped to the United States on Wednesday, escalating a global trade war. The tariffs, scheduled to go into effect on April 3 at 12:01 am ET, are aimed at bolstering America’s auto manufacturing sector. In recent years, automakers have operated under a free trade agreement treating Canada, Mexico, and the United States as a single entity with no tariffs between them. Despite the robust auto industry in the United States, Trump seeks to expand it further.
Trump emphasized that the tariffs would apply to all cars not made in the United States, imposing a 25% tax. However, vehicles manufactured within America will not be subject to any tariffs, according to the executive proclamation he signed in the Oval Office. The newly announced tariffs will stretch beyond foreign-made cars to include car parts like engines and transmissions, with the effective date for these on non-US car parts set for no later than May 3.
Parts originating from Canada and Mexico that abide by the United States-Mexico-Canada Agreement (USMCA) will be exempt from tariffs until the US Customs and Border Protections implements a system to apply them to non-US parts, as outlined in a White House fact sheet. Trump mentioned discussing the tariffs with major automakers like Stellantis, Ford, and General Motors, noting that companies with US factories would benefit from the measures.
Following the announcement, stocks in all three automakers—General Motors (GM), Ford (F), and Stellantis (STLA)—declined in after-hours trading. In Japan, Toyota (TM), Honda (HMC), and Nissan also saw a drop in their share prices. The tariffs have sparked concerns globally, with leaders like Japanese Prime Minister Shigeru Ishiba and Ontario Premier Doug Ford voicing intentions to explore countermeasures.
The tariffs are forecasted to disrupt the crucial manufacturing industry, potentially leading to increased prices for American consumers. Half of the approximately 16 million cars, SUVs, and light trucks purchased by Americans in 2024 were imports. Industry experts estimate that the tariffs, extending to parts, could elevate new car prices significantly, with vehicles produced in the US factories expected to cost an additional $3,500 to $12,000 each to manufacture.
The North American auto industry, operating under free trade agreements for years, may face challenges due to the tariffs, which could potentially eliminate lower-cost car options for consumers. Automakers, including the Big Three, are assessing their options amid the uncertainty created by the new trade policies introduced by Trump. The tariffs’ ramifications extend beyond national borders, impacting not only Canadian and Mexican auto industries but also American parts suppliers and even US car exports to those countries.