U.S. President Donald Trump announced new tariffs on imported vehicles and auto parts on Wednesday, a move expected to raise car prices and disrupt an industry already transitioning to electric vehicles. The 25% tariffs, set to take effect on April 2, will apply to all imported cars and “key automobile parts,” including engines, transmissions, and electrical components, the White House said.
The policy will impact automakers reliant on foreign production, as roughly half of the 16 million vehicles sold in the U.S. last year were imported, according to S&P Global Mobility. Canada, Mexico, South Korea, Japan, and Germany are among the largest exporters to the U.S. Meanwhile, about 60% of parts in American-made cars are sourced from abroad.
Trump said the tariffs would encourage automakers to shift production to the U.S. “A lot of foreign car companies already have plants here, but they’re underutilized. This will help them expand,” he said. “And others will come into our country and build.”
The new policy marks a departure from previous tariff postponements on Canadian and Mexican imports. Trump emphasized that the measures are permanent, stating, “100%.”
Impact on Consumers and Industry
Analysts warn the tariffs will increase car prices and force automakers to adjust supply chains, a process requiring years of investment. Cox Automotive estimates the tariffs could add $3,000 to U.S.-built vehicles and $6,000 or more to those assembled in Canada and Mexico.
“Over the longer term, we expect sales to fall, prices for new and used cars to rise, and some models to be discontinued if these tariffs persist,” said Jonathan Smoke, chief economist at Cox Automotive.
Autos Drive America, a trade group representing foreign automakers in the U.S., criticized the policy. “These tariffs will make it more expensive to produce and sell cars in the U.S., leading to higher prices, fewer options for consumers, and fewer manufacturing jobs,” said CEO Jennifer Safavian.
EV Market and Manufacturing Shift
The tariffs are expected to complicate the shift to electric vehicles, where high costs remain a key barrier for consumers. Many EVs sold in the U.S. are assembled abroad, including the Chevrolet Equinox EV, Ford Mustang Mach-E, Toyota bZ4X, and Hyundai Kona Electric.
Tesla, along with startups Rivian and Lucid, manufactures its U.S. vehicles domestically, potentially insulating them from price increases. Foreign automakers such as Toyota, Honda, Volkswagen, BMW, and Mercedes also operate U.S. plants, and some companies have recently expanded their manufacturing presence.
On Wednesday, Hyundai Motor Group officially opened its $7.6 billion Metaplant in Savannah, Georgia, where it will produce the Ioniq 5 and the upcoming Ioniq 9 SUV.
Industry experts say the new tariffs could accelerate investment in U.S. production but caution that near-term price hikes and supply chain disruptions are unavoidable.