The US auto industry and its global rivals were shaken by President Donald Trump’s announcement of a 25% tariff on all imported cars and many auto parts into the United States.
If prolonged, these tariffs could add thousands of dollars to the price of each car in the US and disrupt the auto manufacturing chain across North America. This is due to the close integration within the auto industry between Canada, Mexico, and the US over the past three decades.
According to research firm GlobalData, nearly half of the vehicles sold in the US last year were imported.
In 2024, Thailand exported 42,000 passenger cars to the US, along with approximately $4 billion worth of auto parts. Manufacturers have been warned to prepare for disruptions as the new tariffs come into force.
The order, signed by Trump, expands the trade war to boost domestic production and sets the stage for broader tariff measures in the coming week.
“We will be taxing the cars that come into our country like water, taking away our jobs and wealth,” Trump said at the White House on Wednesday.
The tariffs will come into effect from 00:01 am on April 3 (Washington time).
Illustration: The first batch of VinFast cars exported to the US in late 2022
The White House said the tariffs would apply not only to finished vehicles but also to critical components such as engines, transmissions, drive systems, and electronics. Tariffs on parts will take effect no later than May 3, with the potential to expand the taxable category in the future.
Auto importers under the US-Mexico-Canada Agreement (USMCA) can certify their domestic content to be taxed only on the portion not produced in the US.
Trump asserted that this tariff would be “permanent” and that he had no intention of negotiating any exceptions.
General Motors’ shares fell 8%, while Ford and Stellantis lost 4.5% in after-hours trading as Trump spoke. Shares of Asian carmakers, led by Toyota, fell 3-4% in Thursday’s trading session.
Tesla’s shares, which manufactures all its cars in the US but still imports some components, fell 1.3%.
Trump suggested that the new tariff could be “neutral or beneficial” for Tesla and asserted that CEO Elon Musk did not advise him on this auto tariff policy.
On social media X, Musk acknowledged that the tariffs would affect Tesla.
“This tariff will impact the cost of the Tesla parts imported from abroad,” Musk wrote. “The cost is not trivial.”
Trump’s tariff actions have caused uncertainty for businesses and turmoil in global markets since he returned to the White House in January.
On Wednesday, he emphasized that this tariff would encourage car companies to invest more in the US rather than Canada or Mexico.
The organization Autos Drive America, representing foreign automakers such as Honda, Hyundai, Toyota, and Volkswagen, warned:
“The new tariffs will increase the cost of manufacturing and selling cars in the US, ultimately leading to higher prices, fewer choices for consumers, and fewer jobs in the manufacturing sector.”
The North American auto industry has enjoyed almost free trade since 1994. The USMCA agreement, introduced by Trump in 2020, imposes new regulations to promote in-region parts production.
After imposing a 25% tariff on Mexico and Canada earlier in March, Trump temporarily exempted vehicles that met the USMCA criteria, benefiting US companies. However, the new rule will not extend this exemption.
“Companies that have invested hundreds of millions, even billions of dollars, in plants in Canada and Mexico could see their profits drop significantly over the next few quarters, perhaps years,” said Sam Fiorani, an expert at AutoForecast Solutions.
“We will have to adjust our sales and production forecasts because this will throw the entire industry into chaos.”
Before the new tariffs were announced, auto service firm Cox Automotive estimated they could add $3,000 to the price of each car made in the US and $6,000 to those produced in Canada or Mexico if they were not exempt from tariffs.
If the tariffs come into force, Cox predicts that North American auto production could fall by 30%, equivalent to 20,000 cars per day, by mid-April.
Meanwhile, the United Auto Workers (UAW) union, representing workers at the Big Three Detroit automakers, welcomed Trump’s action.
“With this tariff, thousands of high-paying auto manufacturing jobs could return to US labor communities in the coming months, simply by adding shifts or adding lines at underutilized plants,” said UAW President Shawn Fain.
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