Trump Enacts New Tariffs, Sparking Price and Production Concerns
President Donald Trump announced increased tariffs on new vehicles imported for sale into the United States, effective April 3. The tariffs also apply to systems and parts, including engines, transmissions and electrical components.
“This is very modest. What we’re going to be doing is a 25% tariff on all cars that are not made in the United States. If they’re made in the United States, there is absolutely no tariff,” Trump said in a press conference broadcast by AP and other outlets, noting the threat of tariffs had already spurred unspecified manufacturers to move operations stateside. “We’re getting permits very quickly for them, and we’re going to make their life very happy. They’re coming in with tens of billions of dollars.”
The announcement follows several weeks of speculation and anxiety as industry watchers fear the tariffs will result in higher prices, lower demand and reduced production. Stock markets fell in response to White House Press Secretary Karoline Leavitt’s Wednesday-morning confirmation that the announcement was impending; auto stocks are likely to lose more value as concerns over sales and supply chains mount.
Analysts with Kelley Blue Book and Cox Automotive independently predicted a 25% tariff on goods from Canada and Mexico — including built or assembled vehicles as well as parts — would add about $3,000 to the average purchase price of affected units. About half of all new vehicles sold in the U.S. are built or assembled elsewhere, including models produced by Ford, General Motors and Stellantis.
On a Wednesday conference call, Chief Economist Jonathan Smoke predicted U.S.-based vehicle manufacturing would decrease by about 30% in anticipation of reduced demand. “By mid-April, we expect disruption to virtually all North American vehicle production. Bottom line: lower production, tighter supply and higher prices are around the corner.”
Earlier this month, Trump granted U.S. automakers a 30-day exemption to 25% tariffs on Canadian and Mexican imports announced in early February. At the time, Leavitt told reporters the pause was intended to give those factories an opportunity to strategize for increased domestic manufacturing.
“He told them that they should get on it, start investing, start moving, shift production here to the United States of America where they will pay no tariff,” Leavitt said.
