President Donald Trump is continuing his use of tariffs in an effort to level the playing field of global trade and reinvigorate manufacturing in the U.S. In an executive order signing session on Friday, Trump answered questions from the press regarding his plan to impose tariffs on all automobiles imported to the U.S.
“Maybe around April 2,” Trump said of the timeline for the new auto tariffs, according to Reuters. “I would have done them on April 1 … But we’re going to do it on April 2.” Trump has directed his economic advisors to make plans for reciprocal tariffs on goods coming in from any country that collects import taxes on U.S. goods. Secretary of Commerce nominee Howard Lutnik expects these plans to be submitted to the president by April 1st.
It’s unclear at this time how high the tariffs will be and whether different regions of the world will be subject to different rates. Trump has previously mentioned the imbalance of the European Union’s 10 percent tariff on vehicle imports, while the current tariff for cars coming to the U.S. from the EU is only 2.5 percent.
It’s also unclear whether domestic automakers like Ford, GM, and Stellantis will be subject to tariffs for the cars they import from overseas factories, or if it will only apply to foreign automakers. For example, GM imports many subcompact crossovers from South Korea, which aren’t subject to tariffs under the United States-Korea Free Trade Agreement (KORUS FTA). Trump renegotiated KORUS FTA during his first term, which doubled the cap on U.S. auto exports to South Korea. Trump could be looking to make some more changes to the deal.
The “Chicken Tax,” in place since 1964, includes a 25 percent tariff on pickup trucks imported to the U.S. from outside North America. Since every pickup truck sold in the U.S. is built in North America, the Chicken Tax is arguably a piece of evidence that tariffs can be effective in incentivizing automakers to build USDM vehicles domestically.
According to the United States-Mexico-Canada Agreement (USMCA), which has been in effect since 2020, if a vehicle is determined to have at least 75 percent of its parts originating from the three North American countries, it is not subject to tariffs. However, Trump’s aggressive tariff agenda could change that, with his threats of 25 percent tariffs on all goods imported from Canada and Mexico, which are currently on hold.
