Trump Slaps 25-Percent Tariff On All Imported Cars, Trucks, And SUVs (and Components!)
Buckle in, because the auto industry is hittin’ the rocks April 2.
President Trump today announced a 25-percent tariff on all cars and trucks imported to the U.S. as well as all imported auto parts and components. The tariffs are expected to increase the cost of an imported car, truck, SUV by up to $6,000, according to Cox Automotive.
A tariff is a tax paid by the importer in this country on a good brought in from outside the country. It is not, as the president has falsely said, paid by the country the good is produced in. The cost of a tariff is generally passed on to the consumer.
Trump previously announced tariffs on imported vehicles (amongst other goods) back on February 2, only to immediately suspend them for 30 days. Shortly after those tariffs went into effect, Trump on March 5 exempted the auto industry for another 30 days. Now, a week ahead of the newest deadline, the President has announced a revised 25-percent tariff on all cars, trucks, and SUVs imported to the U.S. from any foreign nation, including from allies like Canada, Mexico, Germany, South Korea, the United Kingdom, and more. Previously, imported vehicles faced a 2.5-percent tariff.
The president called the new tariff “very exciting” and said it is “100 percent” permanent, though he has previously reneged on tariffs soon after implementing them.
Nearly half of all passenger vehicles sold in the U.S. are imported, according to The New York Times. Popular models include everything from the Toyota RAV4 SUV to the Ram HD pickup trucks. Lawmakers in auto producing nations, Canada in particular, have already vowed retaliatory tariffs which could further stifle trade, increase prices, and hurt U.S. manufactures and the larger U.S. economy as a whole. Automakers in America and abroad expect the tariffs to be devastating to their businesses and profitability.
The tariff on parts and components has the potential to be even more damaging. Many components cross the border (typically to and from Canada and Mexico) multiple times during the production process and would be taxed every time they return to the U.S. This will make manufacturing the final vehicle more expensive, even those whose final assembly takes place here, which will in turn lead to higher prices at the dealer to recoup those tariff-induced costs.
Trump has previously taken aim at components, and during his announcement today called that supply chain “ridiculous” and suggested they should be reorganized to produce everything needed to build a complete car in one place. Automotive supply chains haven’t worked this way in nearly a century, and even more vertically integrated manufacturers today still import many components. Never mind that Trump himself negotiated the free trade agreement between Mexico, Canada, and the U.S. during his first term, which further cemented those “ridiculous” supply chains.
Trump, however, said the tariffs would lead to “tremendous growth in the auto industry” and that car prices will go down as a result, though effectively all experts agree the opposite will happen. Trump pointed to recent investment announcements from automakers as evidence his tariffs were directly responsible for increasing auto manufacturing in the U.S., but most if not all of those announcements were made before Trump took office, such as is the case for Hyundai, or are not real, in the case of a Honda plant the president pointed to which the company says doesn’t exist.
