U.S. President Donald Trump announced a 25% tariff on all imported vehicles, set to take effect on April 3.
The move is expected to disrupt global auto trade and supply chains, impacting major car-producing nations including Canada, Mexico, Japan, South Korea, and Germany. The tariffs also extend to key automotive parts, with duties on engines, transmissions, powertrain components, and electrical systems set to follow by May 3.
The administration has introduced a partial exemption for vehicles and parts compliant with the U.S.-Mexico-Canada Agreement (USMCA), but only for their U.S.-produced content. This means a truck built in Mexico with 45% U.S. content will still be subject to the 25% tariff on the remaining 55% of its value.
Until the Commerce Department and U.S. Customs and Border Protection establish a process for determining non-U.S. content, USMCA-compliant parts will remain duty-free.
The legal basis for the tariffs comes from a 2019 national security investigation under Section 232 of the Trade Expansion Act of 1962. The Commerce Department previously found that rising automotive imports threatened U.S. national security by weakening domestic automakers’ ability to develop advanced military technologies.
Trump initially chose to negotiate trade deals rather than impose tariffs but has now concluded that these discussions have failed to protect U.S. interests.
The decision triggered immediate backlash from global markets and governments. Auto stocks in Europe and Asia fell sharply, with major carmakers in Germany, Japan, and South Korea seeing losses.
Canadian Prime Minister Mark Carney condemned the tariffs as a direct attack on Canadian workers, while European Commission President Ursula von der Leyen criticized them as harmful to businesses and consumers. Germany’s economy minister called for a strong European Union response, warning that the tariffs would not go unanswered.
China also denounced the move, stating it violated World Trade Organization rules and undermined the global trade system.
Trump has defended the tariffs as a strategy to support American manufacturing and raise revenue to offset tax cuts. The United Auto Workers union, a long-time opponent of free trade agreements, welcomed the decision, arguing it would help restore U.S. jobs in the automotive sector.
However, the policy is expected to drive up prices and reduce demand, further straining an industry already navigating economic uncertainty and shifting trade policies.
In a warning to trade partners, Trump suggested even harsher measures could follow if the European Union and Canada retaliate. He stated that any coordinated economic action against the U.S. would result in even larger tariffs, reinforcing his administration’s aggressive stance on reshaping global trade.
