“Tariffs” is undoubtedly a prime candidate for the 2025 word of the year, as President Trump announced that the U.S. would impose a 25% tariff on all cars and car parts not made in the country starting April 3. The move aims to give American auto jobs and industry a competitive advantage, but it’s stirring strong reactions both at home and abroad.
New Tariffs on Top of Existing Ones
The tariff will apply to finished vehicles and parts alike. There had been talk about sparing auto parts, but that’s off the table now, unless those parts meet strict U.S.-Mexico-Canada trade rules. Existing duties, like the 2.5% import tax and a long-standing 25% “chicken tax” on light trucks, will still apply, meaning this new tariff stacks on top. Cars and trucks made in Canada and Mexico will also be hit, despite free trade deals, because of unrelated disputes, like fentanyl trafficking.
Unsurprisingly, world leaders aren’t pleased. Canada’s Prime Minister Mark Carney called the move “a direct attack on Canadian workers” and hinted at payback. The European Union also voiced regret, saying it would protect its economic interests. Meanwhile, Trump doubled down, warning he’d slap even bigger tariffs on countries that retaliate or “hurt the U.S. economy.”
Industry Implications
Automakers and industry groups are also worried. Nearly half of all new cars sold in the U.S. in 2024 were made outside the country. Mexico is the top source, followed by Japan, Canada, and South Korea. Popular models like the Toyota RAV4 (TM), Honda Civic (HMC), and GM’s Silverado (GM) come from plants in Canada or Mexico. Big-name brands like BMW (DE:BMW) , Audi, and Hyundai (HYMLF) also ship large volumes.
The tariffs could hit these companies hard. Analysts at Cox Automotive estimate the added cost per vehicle imported from Canada or Mexico could be around $6,000 – a sharp spike that could make many cars less affordable for U.S. buyers. Japanese and South Korean vehicles could increase costs from $2,000 to $3,000. With nearly 50% of U.S. car sales relying on imports, a big chunk of the market is affected.
Carmakers may try to shift production to U.S. plants, but that’s a long and pricey move. Many are bracing for tighter supply, slower production, and fewer sales.
Stocks’ Reaction
Of course, Wall Street noticed. Since the announcement, stocks for big U.S. automakers have taken a hit. General Motors dropped 6.5% after hours. Stellantis (STLA), which makes Jeep and Ram, fell 2.5%, while Ford’s (F) needle hardly moved. Tesla (TSLA), which builds all its U.S. cars at home, rose around 1%, likely because it’s not affected by the new rules.
The bottom line? Prices are likely going up. With fewer cars on lots and higher sticker prices, car buyers and sellers alike will feel the heat. The ripple effects could stretch far beyond the auto industry as supply chains shift and trade tensions grow.
Tipranks’ Comparison Tool
We’ve assembled all the auto manufacturers mentioned in the article and would potentially be affected by the new tariff policy. Tipranks’ comparison tool can provide a comprehensive perspective on each company and the industry as a whole.
