BREAKING: Trump announces 25% tariffs on imported cars and automotive parts

President Donald Trump will impose a 25% tariff on imported cars and auto parts in the United States, a move likely to raise prices for US consumers and destabilize supply chains as the president seeks to boost US manufacturing.

The tariffs will come into effect on April 3 and will apply both to finished cars and trucks shipped to the US and to imported parts assembled into cars in US factories. These tariffs will affect both foreign and US brands, such as Ford Motor and General Motors, which manufacture some of their vehicles in Canada or Mexico.

Almost half of all vehicles sold in the United States are imported, as are almost 60% of the spare parts for vehicles assembled in the United States. This means that tariffs could considerably raise the prices of cars at a time when inflation has already made cars and trucks more expensive for US consumers.

During a speech at the White House, Trump said that the tariffs would encourage car companies and their suppliers to set up in the United States.

Mexico is the largest source of vehicle imports for the United States, followed by Japan, South Korea, Canada and Germany.

Trump argues that tariffs will increase domestic car production, but it is unclear how quickly he can achieve that goal. Tariffs may encourage companies to use more US-made products and expand production, but building new factories usually takes several years and can cost billions of dollars.

The additional costs that the tariffs will introduce could also prove economically counterproductive, damaging the US automotive industry by reducing its profits and slowing down its sales.
The measure could also trigger more trade confrontations with foreign countries that send many cars to the United States. And it could provoke retaliation against US exports, including cars and agricultural products.

The tariffs could devastate the manufacture of cars and car parts in Canada, which directly employs around 125,000 people and represents around 10% of the country's manufacturing output. Between 80% and 90% of Canadian production is exported.

The situation is equally serious in Mexico, where car manufacturing accounts for around 5% of the country's economic activity and employs around one million people

General Motors manufactures some of its Chevy Silverado and GMC Sierra pickups in Mexico. Toyota's Tacoma pickup and two Stellantis models, the Ram pickup and Jeep Compass sport utility vehicle, are also made there. The Silverado, Toyota's RAV4 sport utility vehicle, the Honda CR-V and other popular models are made in Canada.

The government said the 25 percent tariff would apply to both cars and automotive parts made in Canada and Mexico, despite the trade agreement the United States signed with those nations. It created a small exception to those levies, saying that any content or material originating in the United States but incorporated into finished cars in Canada and Mexico would be exempt.

Otherwise, White House officials indicated that there would be no exemptions, and Trump said that he expected the tariffs to be permanent.

Given the size and importance of the automotive industry, the effect of the tariffs will cascade throughout the economy.

Trump's decision to impose tariffs on cars intensifies his aggressive trade approach. Since coming to power, he has imposed an additional 20% tariff on all US imports from China. He also imposed a 25% tariff on almost all products from Canada and Mexico, before exempting approximately half of those imports, which trade under the rules of the North American trade agreement.