Donald Trump to impose 25% tariff on US auto imports

The US will impose tariffs of 25 per cent on imports of foreign-made autos, Donald Trump said on Wednesday, as he announced a significant escalation in his trade war with America’s allies.

The tariffs will go into effect on April 2, the US president’s self-imposed deadline for unveiling numerous reciprocal tariffs against US trading partners.

“This is the beginning of Liberation Day in America,” Trump said in the Oval Office on Wednesday evening. “If you build your car in the United States there will be no tariff,” he added.

Asked if there was anything carmakers could do to have the tariffs removed, Trump replied: “This is permanent, 100 per cent.”

The president offered a reprieve to the auto industry earlier this month when he temporarily exempted from new tariffs all goods that complied with the trade terms in 2020 of the United States-Mexico-Canada Agreement.

Trump did not outline any such exemptions. “For the most part, I think it’s going to lead cars to be made in one location,” he said.

A US official later confirmed that the tariffs would apply to auto parts, as well as to completed cars. A White House factsheet said parts subjected to the tariffs would be engines, transmissions, power-train parts and electrical components.

The official added that the 25 per cent would apply in addition to any other tariffs.

Cars that were compliant with the trade terms of the USMCA and enter the US would only face a tariff on their foreign parts, a US official said.

“For example, if a car from Mexico comes in with 50 per cent American parts and 50 per cent foreign parts, the tariff will be 50 per cent of 25 per cent which is 12 and [a] half per cent,” the official said.

Auto parts entering the US under the USMCA would temporarily be exempt from the tariffs, but would face 25 per cent levies on their non-US content once the US develops a process to calculate them, according to the factsheet.

“The revenues we’re going to use to give the largest tax cut in American history,” a US official said. “Tariffs equal tax cuts.”

The White House invoked a 1962 national security law to apply the tariffs, arguing that the country’s auto industry was “vital” for national security and “has been undermined by excessive imports threatening America’s domestic industrial base and supply chains”.

Ursula von der Leyen, president of the European Commission, said the bloc regretted the decision.

“We will now assess this announcement, together with other measures the US is envisaging in the next days,” she said. “The EU will continue to seek negotiated solutions, while safeguarding its economic interests.”

Von der Leyen added: “As a major trading power and a strong community of 27 member states, we will jointly protect our workers, businesses and consumers across our European Union.”

The United Auto Workers union welcomed the tariffs. “Ending the race to the bottom in the auto industry starts with fixing our broken trade deals, and the Trump administration has made history with today’s actions,” said Shawn Fain, UAW president.

Carmakers have lobbied heavily against the tariffs, arguing they would upend their supply chains and increase the cost of cars for American motorists.

General Motors shares slid 7 per cent in after-hours trading on Wednesday, while US-listed shares in Chrysler parent Stellantis fell by 4 per cent, according to FactSet data. Ford slipped about 5 per cent.

Almost half of vehicles sold in the US are imported and vehicles assembled in the US contain nearly 60 per cent of foreign-sourced parts, according to Bernstein analyst Daniel Roeska.

“A 25 per cent [tariff] on automotive imports lasting beyond four to six weeks would likely have a chilling effect on the entire sector as OEMs [original equipment manufacturers] need to grapple with significant impact to the bottom line,” he said.

Jessica Caldwell, head of insights at automotive research company Edmunds, said vehicle prices were likely to rise as carmakers pass their increased costs on to consumers.

“With the tariff set at a notable 25 per cent, it’s reasonable to expect that vehicle prices will rise, which presents an added challenge to an industry that is already grappling with ongoing affordability concerns,” she said.

The largest source of vehicle imports to the US is Mexico, which sent 2.77mn across the border in 2024 — the vast majority tariff-free under the USMCA. Mexico’s economy minister Marcelo Ebrard was in Washington on Wednesday to meet with commerce secretary Howard Lutnick.

The auto tariffs could be a devastating blow to Mexico’s economy, where some 1mn people are directly employed in a sector that accounts for about 4 per cent of GDP.

Canadian automakers also criticised the move. “China could only dream of damaging the American auto industry so quickly and so decisively as what the American president is threatening to do here again,” said Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association. 

Canadian Prime Minister Mark Carney said his government would use revenues raised from retaliatory tariffs to fund and protect vulnerable workers and companies.

“This is a direct attack on the workers I stood in front of this morning, at the Ambassador Bridge [linking Canada and the US], a bridge that is the symbol, and a reality up until now, of the tight ties of our two countries,” Carney told reporters on Wednesday evening.

Trump’s announcement was the latest in a series of tariffs he has rolled out since his return to office in January, including an additional 20 per cent levy on all goods from China, and 25 per cent on all imports of steel and aluminium into the US.

Earlier this week, Trump said the US would apply tariffs of 25 per cent on all goods imported to the US from countries that bought Venezuelan oil and gas, also beginning April 2. Those tariffs would likely hit China, India, Spain and Italy, among others.

“Basically, I view it as reducing taxes and also reducing debt,” Trump said, of his tariffs. “And within a fairly short period of time, I think we’re going to have a balance sheet that’s going to be outstanding.”

Additional reporting by Andy Bounds, Ilya Gridneff and Christine Murray