WASHINGTON – U.S. automakers and international competitors face significant disruption following the recent announcement of a 25% tariff on all vehicles and many foreign-made auto parts imported into the United States. This decision, if sustained, could substantially increase the cost of an average U.S. vehicle and hinder car production across North America.
The automotive industry has developed intricate manufacturing operations over the past thirty years across Canada, Mexico, and the United States. Currently, nearly half of all cars sold in the United States are imported, according to research findings.
In 2024, Thailand is projected to export 42,000 passenger cars and approximately $4 billion worth of parts to the United States, putting local manufacturers on alert as new tariff regulations take effect.
The recently signed proclamation expands a trade strategy aimed at revitalizing U.S. manufacturing jobs and preparing for broader tariffs expected to be announced soon.
“We’re going to charge countries for doing business in our country and taking our jobs, taking our wealth,” stated President Trump. The tariffs on automobiles will take effect at 12:01 AM Washington time on April 3.
The White House confirmed that the tariffs will apply not only to fully assembled vehicles but also to crucial components such as engines, transmissions, and electrical parts, with implementation for these parts slated to begin no later than May 3.
Importers of automobiles under the United States-Mexico-Canada Agreement (USMCA) will have the opportunity to certify their U.S. content, allowing only non-U.S. content to be taxed.
President Trump indicated that these tariffs would be permanent and expressed a lack of interest in negotiating exceptions. Following his announcement, shares of General Motors dropped by 8%, while Ford and Stellantis fell by 4.5%. Asian manufacturers, particularly Toyota, also saw declines in early trading.
Despite Tesla manufacturing all its cars sold in the United States locally, its shares decreased by 1.3%. President Trump remarked that the announced tariffs could be neutral or even beneficial for Tesla, clarifying that CEO Elon Musk had not advised him on the matter.
In a recent statement, Musk acknowledged that the tariffs would impact Tesla, particularly regarding the cost of imported parts. “The cost impact is not trivial,” he stated.
The introduction of tariffs has created a wave of uncertainty in business environments and disrupted global markets since Trump resumed office in January. Trump expects these tariffs to encourage automakers to invest more heavily in the U.S. rather than in Canada or Mexico.
Autos Drive America, a group representing major international automakers, warned that these tariffs would increase production and sales costs in the United States, ultimately resulting in higher prices, fewer consumer choices, and reduced manufacturing jobs domestically.
Since 1994, North American automakers have largely benefited from free trade status. The USMCA, enacted in 2020, imposed new regulations to enhance regional content production.
Previously, tariffs of 25% on Canada and Mexico were introduced, but a temporary reprieve was granted for compliant vehicles. However, the current new regulations do not extend this reprieve.
Analysts predict that companies that have made substantial investments in Canadian and Mexican plants will face significant profit reductions in the coming quarters. Expert analysts indicated that production forecasts would need adjusting due to the anticipated chaos from the tariff implementation.
Before the announcement, predictions suggested that the tariffs could add around $3,000 to the cost of U.S.-made vehicles and $6,000 for those produced in Canada or Mexico. If enacted, disruptions may affect nearly all North American vehicle production by mid-April, potentially resulting in a decrease of about 20,000 vehicles per day, or roughly a 30% production drop.
The United Auto Workers union praised the decision, asserting that it could lead to thousands of well-paying auto jobs returning to working-class communities across the United States. “These tariffs could result in additional shifts in underutilized plants,” stated the UAW president.
