All vehicles and certain car parts manufactured outside the US will be hit with a 25 per cent import tariff from April 2, 2025, President Donald Trump announced overnight.
The new tariff is 10 times higher than the existing 2.5 per cent duty tax on all vehicles imported to the US, though not as large as the 100 per cent tariff on Chinese electric vehicles (EVs).
While the US has imposed a 25 per cent tariff on vans and ‘light trucks’ – pickups and utes – made overseas since 1964, this doesn’t apply to those made in border nations Canada and Mexico.
The new tariff won’t apply to vehicle parts which comply with free trade rules under the United States-Mexico-Canada Agreement for now, however the Commerce Department will be investigating how to apply taxes based on non-US content.
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According to Automotive News, nearly half of all vehicles sold in the US are imported, while almost 60 per cent of parts used in US-made vehicles are from foreign countries.
The main sources of vehicles sold in the US are Mexico, Japan, South Korea and Germany – all but the latter of which have free trade agreements for automotive products.
President Trump called the automotive supply chain “ridiculous”, while claiming the tariffs will not only “lead cars to be made in one location” but also bring US$100 billion (A$159 billion) in annual government revenue.
As expected, the United Auto Workers (UAW) union – which represents employees of US carmakers – supported the tariff, despite its president Shawn Fain being one of Mr Trump’s most vocal critics in the leadup to last year’s election.
“We applaud the Trump administration for stepping up to end the free trade disaster that has devastated working class communities for decades,” said Mr Fain.
“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.”
However, the US automotive industry has reacted with shock and trepidation to the 25 per cent tariff announcement, with analysts such as Cox Automotive telling Automotive News the new tax could add up to $3000 to the cost of US-made vehicles.
“At a time when cost is the number one concern for American car buyers, US automakers are working to provide a range of affordable vehicles for consumers,” Jennifer Safavian, CEO of Autos Drive America, told Automotive News.
“The tariffs imposed today will make it more expensive to produce and sell cars in the United States, ultimately leading to higher prices, fewer options for consumers and fewer manufacturing jobs in the US.”
President Trump is also expected to announce further tariffs on the US’s trade partners on April 2, having previously launched then paused a 25 per cent tax on all goods from Canada and Mexico.
