President Donald Trump has escalated trade tensions with a sweeping 25% tariff on all foreign-made vehicles entering the U.S., effective April 2, alongside plans to extend duties to automotive components by May 3. The policy, formalised via executive order, aims to bolster domestic manufacturing while exempting U.S.-built cars entirely.
The tariffs target not only finished vehicles but also critical parts like engines and transmissions, with exemptions for components from Canada and Mexico under the USMCA until enforcement mechanisms are established.
Analysts warn this could disrupt supply chains, as nearly half of the 16 million vehicles sold in the U.S. in 2024 were imported. Cox Automotive projects price hikes of up to £4,500 for models like the Toyota Tacoma and Chevrolet Equinox, potentially reducing weekly production by 20,000 vehicles and tightening supply.
Shares of major automakers—including General Motors, Ford, and Stellantis—plummeted in after-hours trading, with declines exceeding 7% for GM and 4% for Ford. Foreign brands like BMW and Mercedes-Benz also saw losses. Dealerships warn the tariffs could raise average car prices by £2,800–£7,400, compounding affordability challenges amid rising loan rates and inflation.
European Commission President Ursula von der Leyen condemned the tariffs as “taxes — bad for businesses, worse for consumers equally in the US and the European Union,” as she vows to pursue negotiated solutions. Trump framed April 2 as a pivotal date for reciprocal tariffs targeting trade-deficit nations, though recent remarks suggest flexibility in implementation. The administration claims the measures will generate $100 billion annually, citing Honda’s Indiana plant as evidence of policy success.
While Senator Bernie Moreno (R-Ohio) hailed the tariffs as a catalyst for manufacturing revival, critics argue they could accelerate a shift away from car ownership among younger consumers and strain dealership workforces. The Big Three automakers, reliant on international supply chains, face rising production costs despite temporary USMCA exemptions.