According to a latest Bloomberg report, President Trump announced a 25% tariff on all non-U.S. manufactured cars, effective April 3, which aims to boost U.S. manufacturing. Cars built in the U.S. will be exempt, and automotive parts complying with the U.S.-Mexico-Canada Agreement (USMCA) will also be exempt.
“What we’re going to be doing is a 25 per cent tariff on all cars that are not made in the United States. This will be permanent,” Trump said from the Oval Office. “We start off with a 2.5 per cent base, which is what we’re at, and go to 25 per cent.”
This tariff, in addition to the existing 2.5%, will apply to fully assembled cars and essential auto components such as engines, transmissions, powertrain parts, and electrical components. If parts are produced in the U.S. but the vehicle is not, those parts will be exempt. The list of covered items may grow over time to include additional components.
Tariff Exempts USMCA Compliant Auto Parts
Trump argues the tariffs will boost U.S. manufacturing and eliminate the “ridiculous” supply chain involving the U.S., Canada, and Mexico.” Trump emphasized that the tariff would simplify the process and help reduce U.S. debt significantly. He described the tariff as both a tax reduction and a way to improve the country’s financial balance sheet in the near future.
Howver, the decision has sparked concerns about market volatility. Trump clarified that Elon Musk did not have a role in advising on this auto tariff policy, despite earlier comments suggesting that tariffs could be “net neutral or maybe good for Tesla.”
Foreign Leaders Criticise The Tariffs
European Commission President Ursula von der Leyen described the move as “bad for businesses, worse for consumers.” Canada’s new Prime Minister, Mark Carney, criticized the U.S. trade move, vowing to defend Canadian workers and companies.
Tariffs May Drive Up Car Prices, Impact Sales and Jobs
Shares of U.S.-listed automakers dropped due to concerns that tariffs could disrupt the global auto industry. The U.S. auto industry depends on imported parts, and experts warn that these tariffs could make cars more expensive, limit choices for consumers, and result in fewer manufacturing jobs.
The new tariff may raise the price of imported cars, potentially contributing to inflation. Trump was voted back into the White House last year because voters believed he could bring down prices.
The auto tariffs are part of Trump’s broader plan to reshape global trade, with “reciprocal” taxes set to be imposed on April 2, matching tariffs and sales taxes charged by other countries.
