Associated Press, by Josh Boak
WASHINGTON (AP) – President Donald Trump said Wednesday he has placed a 25% tariff on car imports. The White House’s claims will encourage domestic manufacturing, but it also puts financial pressure on automakers that rely on global supply chains.
“This will continue to drive growth,” Trump told reporters. “We effectively charge a 25% tariff.”
The tariffs the White House expects to generate $100 billion in revenue each year can be complicated as even US automakers source components from around the world. The tax hike that begins in April means carmakers could face higher costs and reduced sales, but Trump argues that tariffs will lead to opening more plants in the US, leading to the end of what he determines is a “silly” supply chain made in the US, Canada and Mexico.
To highlight his seriousness, Trump said, “This is permanent.”
General Motors stocks fell about 3% in trading on Wednesday. Ford stocks rose slightly. Shares of Stellantis, the owner of Jeep and Chrysler, fell almost 3.6%.
Trump has long said tariffs on automobile imports have been the decisive policy of the presidency, betting that tax-incurred costs will help reduce the fiscal deficit while more production will move to the US. However, US and foreign automakers have plants all over the world to maintain competitive prices while still being able to accommodate sales around the world. It could take years for businesses to design, build and open new factories that Trump has promised.
“We see much higher vehicle prices,” said Mary Lovely, an economist, a senior researcher at the Institute of International Economics. “We’ll see a decline in options. … These types of taxes fall even more dramatically into the middle class and the working class.”
She said more households already average around $49,000, with prices increasing from the new car market that needs to stick to aging vehicles.
Trump said car tariffs will begin to be collected on April 3. If taxes are passed entirely to consumers, the average car price could increase by $12,500. Trump returned to the White House after losing most of the 2020 election because he believed voters could cut prices.
Just as Trump announced the new tariffs, he pointed out that he would provide a new incentive to help car buyers by allowing interest paid on car loans from car income tax to be deducted from federal income tax. That deduction will be digged into some of the income that could be generated by tariffs.
Motor vehicle fares are part of a broader reshaping of global relations by Trump, who plans to impose what he calls “mutual” taxes on April 2nd, imposing tariffs, sales taxes charged by other countries.
Trump has already placed a 20% import tax on all imports from China due to his role in fentanyl production. Similarly, he placed 25% tariffs on Mexico and Canada, with 10% lower taxes on Canadian energy products. Some Mexican and Canadian tariffs, including taxes on cars, have been suspended after the car manufacturer opposed and Trump responded by giving him a 30-day reprieve that is scheduled to expire in April.
The president also imposes a 25% tariff on all steel and aluminum imports, removing the pre-2018 tax exemption on metals. He also plans tariffs on computer chips, medicines, wood and copper.
His taxes spark a broader world trade war with escalating retaliation that could destroy world trade, and increasing prices for families and businesses could potentially undermine economic growth as part of the tax costs are taken over by importers. When the European Union retaliated with a plan for a 50% tariff on the US spirit, Trump responded by planning a 200% tax on alcoholic beverages from the EU.
Trump also intends to issue a 25% tariff on countries that import oil from Venezuela, despite the US importing oil from the country.
Trump’s aides argue that tariffs in Canada and Mexico are to stop illegal immigration and drug smuggling. However, the administration also wants to use tariff revenue to lower the fiscal deficit and assert America’s excellence as the world’s largest economy.
The president on Monday cited plans by the South Korean automaker, saying it was built a $5.8 billion steel factory in Louisiana, as evidence that tariffs would regain manufacturing jobs.
According to the Bureau of Labor Statistics, more than 1 million people are employed domestically to manufacture cars and parts, approximately 320,000 fewer than 2000. Another 2.1 million people work at automobile and parts dealers.
Last year, the US imported nearly 8 million cars and lightweight trucks worth $244 billion. Mexico, Japan and South Korea were the largest sources of foreign vehicles. Auto parts imports have reached over $1.9 billion, led by Mexico, Canada and China, according to the Commerce Department.
AP reporter Paul Wiseman contributed to this report.
Original issue: March 26, 2025, 1:48pm
