Trump presses ahead with 25% tariff on US auto imports

Washington — US President Donald Trump on Wednesday announced plans for long-promised tariffs of up to 25% on automotive imports, widening the global trade war he kicked off upon regaining the White House this year in a move auto industry experts expect will drive up prices and stymie production.

“What we’re going to be doing is a 25% tariff for all cars that are not made in the US,” Trump said at an event in the Oval Office. “We start off with a 2.5% base, which is what we’re at, and go to 25%.”

Trump has long promised higher duties on imported cars, and the timing of the announcement suggests that they would coincide with his April 2 plans for reciprocal tariffs aimed at the countries responsible for the bulk of the US trade deficit.

Trump, who sees tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining US industrial base, has for weeks promised to announce those levies, and possibly some additional sectoral tariffs, on April 2.

Shares of US-listed automakers fell on news of the press conference on concerns that tariffs would send shock waves through a global auto industry that is already reeling from uncertainty caused by Trump’s rapid-fire tariff threats and occasional reversals.

The US stock market also closed lower on worries over tariffs, which have dogged investors for much of the last month. The benchmark S&P 500 Index fell 1.1% ahead of the press conference, and is down more than 4% so far in March for its worst monthly performance in nearly a year.

Since taking office on January 20, Trump has announced and delayed tariffs on Canada and Mexico for what he alleges is their role in allowing the opioid fentanyl into the US; set import taxes on goods from China for the same reason; launched hefty duties on imports of steel and aluminium; and has repeatedly touted his plans to announce global reciprocal tariffs on April 2.

Tariffs could also drive costs of cars higher for consumers by thousands of dollars, hitting new vehicle sales and resulting in job losses, since the US automotive industry relies heavily on imported parts, according to the Center for Automotive Research.

The US imported $474bn worth of automotive products in 2024, including passenger cars worth $220bn. Mexico, Japan, South Korea, Canada  and Germany, all close US allies, were the biggest suppliers. SA vehicles to the US under the Agoa trade deal account for about 22% of exports, worth $1.88bn, according to government statistics.

Cost increase

Cox Automotive, an automotive services provider, on Wednesday forecast that if there are no tariff carve-outs for the auto industry on imports from Mexico and Canada, $3,000 would be added to the cost of a US-made vehicle and $6,000 on a vehicle made in Canada or Mexico.

If tariffs go through, by mid-April Cox expects disruption to “virtually all” North American vehicle production leading to 20,000 fewer vehicles produced per day, or about a 30% hit to production.

“Over the longer term, we expect sales to fall, new and used prices to increase, and some models to be eliminated if those tariffs persist, and we've yet to hear details about tariffs on the EU, Japan and South Korea,” Cox chief economist Jonathan Smoke said. “Bottom line, lower production, tighter supply, and higher prices are around the corner, reminiscent of 2021.”

Incentives are already starting to decline, Cox noted. The new vehicle market is now looking at a return of inflation, Cox senior economist Charlie Chesbrough said on the firm’s forecast call.

“Given the impact of tariffs, prices are likely to start rising at a much faster rate,” Chesbrough said. With Staff Writer

Reuters