TLDR
- President Trump announced 25% tariffs on all foreign-made vehicles and certain auto parts, effective April 2, 2025
- The White House estimates $100 billion in annual duties will be collected
- Domestic automakers with production in Canada, Mexico, and China also face higher costs
- Vehicle price increases could range from $3,000 to $12,000 per vehicle
- These tariffs could significantly impact both foreign and U.S. automakers’ profits
President Donald Trump has signed an executive order imposing 25% tariffs on all cars and light trucks not made in the United States. The tariffs will also apply to certain auto parts including engines, transmissions, powertrain parts, and electrical components.
The new tariffs are set to take effect on April 2, 2025. These duties will be added to existing tariffs already in place.
“This will continue to spur growth that you’ve never seen before,” Trump said while signing the executive order at the White House on Wednesday. He has called April 2 “Liberation Day” for the US.
The White House estimates that these new tariffs will generate $100 billion in annual duties. This figure suggests the tariffs will affect approximately $400 billion worth of vehicle sales.
Wall Street and automotive stocks reacted immediately to the news. Shares of GM fell 5.1%, Ford dropped 3%, and Stellantis declined 4.3% following the announcement.
European automakers were also affected. BMW, Porsche, Volkswagen, and Mercedes-Benz saw their stock prices drop earlier in the day after the initial news briefing.
Consumer Costs
The impact on vehicle prices could be hefty for consumers. Analysis from various data firms suggests price increases ranging from $3,000 to as much as $12,000 for non-premium vehicles.
Some automakers have already indicated how they might handle these increased costs. BMW stated it will absorb the costs for a short time.
Porsche, on the other hand, suggested it would pass the costs directly to consumers. This signals a split approach among manufacturers in how they’ll manage the financial burden.
Though the tariffs primarily target foreign automakers, domestic manufacturers have expressed concerns too. Ford, GM, and Stellantis all build vehicles in Canada, Mexico, and China.
These companies foresee higher production costs due to the tariffs’ effect on the auto supply chain. Around 50% or more of the parts on many popular models assembled in the U.S. come from Canada and Mexico.
The impact varies by manufacturer. Tesla appears to be the least exposed to these tariffs based on domestic production, as it assembles all the cars it sells in the U.S. within the country.
Vehicle production locations will heavily influence which models face price increases. The Chevy Equinox is made in Mexico, while the Toyota RAV4 is built in Ontario, Canada.
The Ford Escape, manufactured in Kentucky, would avoid the direct tariff impact. This creates an uneven playing field based on where companies have established their manufacturing bases.
Ford produces about 80% of its U.S.-sold vehicles domestically. For GM and Stellantis, that figure is around 55%.
Analyst Reactions
Wedbush analyst Dan Ives described the tariffs as a “hurricane-like headwind” to foreign and many U.S. automakers. He suggested these measures could push average car prices up by $5,000 to $10,000 depending on the make, model, and price point.
“We continue to believe this is some form of negotiation and these tariffs could change by the week,” Ives wrote late Wednesday night. He expects more details to emerge in the coming days.
RBC analyst Tom Narayan had previously characterized 25% tariffs as a potential “disaster” for the auto industry. Many experts didn’t believe such high tariffs would actually be implemented.
UBS analyst Joseph Spak projected that under a scenario with 25% tariffs, both Ford and GM could lose money in 2025. He estimated about $18 billion in increased costs that wouldn’t be recovered.
Wall Street had been expecting profits for major U.S. auto makers and parts companies to remain flat year over year in 2025. The tariff announcement threatens these projections.
CFRA analyst Garrett Nelson noted that the administration’s proposed tariffs are “largely being driven by frustration with the fact that the U.S. imports over three times the value of automobiles it exports.”
Additional Measures
Along with the tariffs, Trump announced a plan to make car loan interest deductible from income taxes, similar to mortgage interest deductions. This could offset some cost increases for consumers financing vehicle purchases.
The administration has positioned these tariffs as “reciprocal,” with Trump stating that other countries have “ripped [us] off” in past trade arrangements. The April 2 date has been dubbed “Liberation Day” by the President.
White House press secretary Karoline Leavitt had earlier indicated Trump would make the announcement during a news briefing with reporters. The actual announcement came later that day from the President himself.
Industry Readiness
According to analysts, the auto sector doesn’t appear ready for the proposed tariffs. The stakes were already high coming into the tariff announcement.
More than seven million cars were imported to the U.S. in 2024. This represents a major portion of the market that will now face increased costs.
The tariffs threaten to upend decades of established manufacturing and supply chain practices. As one analyst noted, “It isn’t easy to untangle 30-plus years of free trade.”
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