President Donald Trump has announced a new 25-percent tariff on all vehicles manufactured outside the United States, beginning April 2nd, 2025. The move marks a significant escalation in Trump’s push to drive domestic manufacturing amid broader U.S. trade tensions. However, experts argue that the new tax could significantly impact vehicle prices for consumers.
As reported by Automotive News, Trump announced the new automotive tariffs during a news conference at the White House earlier today. In a post to X, White House official Harrison Fields added that the tariffs would also apply to engines, transmissions, and various powertrain components. Fields also stated that auto parts which comply with the tariff-free trade rules under the United States-Mexico-Canada Agreement (USMCA) will remain exempt until the Commerce Department sets forth “a process to apply tariffs to their non-U.S. content.”
Currently, the U.S. tariff on imported vehicles is set at 2.5 percent, making the 25-percent rate a tenfold increase. Trump framed the policy as a response to what he called a “ridiculous” global supply chain system that undermines U.S. workers.
“I think it’s going to leads cars to be made in one location,” Trump said, stating that he expects the tariffs to provide $100 billion in annual income to the federal government.
Nevertheless, industry analysts and automakers are raising alarms. The Anderson Economic Group estimates that vehicle prices could rise by $4,000 to $10,000 per unit, including “American” models assembled using foreign-sourced components, potentially leading to job losses across states like Michigan, Ohio, and Texas, as well as the Canadian province of Ontario. Cox Automotive projects at least a $3,000 increase due to supply chain disruptions and limited access to low-cost imported parts, as well as long-term vehicle supply shortages.
Meanwhile, the United Auto Workers (UAW) union has voiced support for the new tariffs, with UAW President Shawn Fain stating that the taxes will provide a long-overdue correction to flawed trade policy that has harmed the working class with “a race to the bottom across borders in the auto industry.” Fain and Trump have long been at odds, with the two trading barbs as recently as February after Fain said that Trump was “using factory workers as pawns in a fight over immigration or drug policy” following earlier tariff threats.
Canadian officials have criticized the policy, warning of retaliatory measures and disruptions to cross-border trade. The tariffs are also expected to invite responses from key trading partners in Europe and Asia.
Following the announcement, stock prices for GM, Ford, and Stellantis saw immediate declines in after-market trading as investors weighed the impact of higher production costs and potential market instability.
