The United States President, Donald Trump, has on Wednesday March 26, 2025, imposed a 25% tariff on all foreign-made cars effective on April 3.
The announcement comes after US automakers secured tariff exemptions on goods from Canada and Mexico, averting 25% tariffs on imports from both countries.
The tariffs also apply to imported car parts, including engines and transmissions, which will take effect no later than May 3.
However, parts from Canada and Mexico that comply with the United States-Mexico-Canada Agreement (USMCA) will be exempt until US Customs develops a system to apply tariffs on non-US parts.
Before signing the proclamation, Trump argued that trade partners have taken advantage of the US auto industry for decades.
“Frankly, friend has been oftentimes much worse than foe,” Trump said, justifying the new tariffs on foreign-made vehicles.
Trump claimed American automakers, including Ford, Stellantis, and General Motors (GM), supported the decision to boost domestic car manufacturing.
“If they have factories here, they’re thrilled,” Trump said. “If not, they’ll need to start building them,” he said.
The announcement has caused stock prices of major automakers to drop sharply in after-hours trading on Wednesday.
GM shares fell over 7%, while Ford and Stellantis declined more than 4%.
Asian carmakers also experienced stock losses.
Toyota’s stock dropped 3.3%, while Honda and Nissan recorded losses exceeding 2% following Trump’s tariff announcement.
Japanese Prime Minister Shigeru Ishiba said his government is evaluating all possible responses to protect its auto industry.
South Korea’s trade minister, Ahn Duk-geun, warned that the tariffs could harm Korean automakers exporting vehicles to the US.
Canada’s Prime Minister, Mark Carney, condemned the tariffs as a violation of the USMCA and hinted at retaliatory measures.
Ontario Premier Dug Ford expressed support for retaliatory tariffs to counter what he called an “unfair attack” on Canadian businesses.
Experts in the auto industry predict car prices in the US could increase by thousands of dollars due to new tariffs on auto parts.
A report from Anderson Economic Group estimates vehicle production costs could rise between $3,500 and $12,000 per car.
The US auto industry relies heavily on Canadian and Mexican parts, making supply chain disruptions inevitable.
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