- President Trump signed executive order assessing a new 25% tariff on foreign vehicle imports.
- Trump says the move will generate revenues to offset the national debt and boost U.S. auto manufacturing.
- Industry watchers say American customers will likely have to pay thousands more for cars.
President Donald Trump on Wednesday afternoon announced a new 25% tariff on “all cars that are not made in the United States.”
While Trump had previously signaled a coming import vehicle tariff, most believed the announcement would not happen ahead of April 2, when the president is expected to enact a wider reciprocal schedule of new levies on international trading partners in a declaration the president has described as “liberation day.”
During Wednesday’s announcement from the Oval Office, White House aide Will Scharf said that the new levy on “foreign-made cars and light trucks” will be added to current tariff assessments and will result in “over $100 billion in new annual revenue to the U.S.”
“This is very exciting.” Trump said. “This is going to lead to the construction of a lot of plants, in this case auto plants. You’re going to see numbers like you’ve never seen in employment. A lot of people making a lot of cars.”
The president did not offer details on any formula to determine a foreign made vehicle versus a domestic product, a differentiation that could be a challenge in a current automobile industry that relies on components from multiple sources, and countries of origin, on virtually every vehicle.
Trump, however, said he anticipated the oversight would not be a problem.
“We’re going to have very strong policing and it’s pretty easy to do,” Trump said.
Trump also hinted at possible future legislation that could create a new tax deduction for U.S. consumers that buy a U.S.-made vehicle.
“If you borrow money to buy a car you’re allowed to deduct interest payments, but only if a car is made in America,” Trump said, while also acknowledging House Speaker Mike Johnson who was present for the Oval Office discussion.
In comments about the extent of the April 2 tariff announcement, Trump mirrored the sentiment shared by administration officials earlier this week that the scope and scale of the new reciprocal levies would be somewhat lighter than earlier anticipated.
“We’re going to make it all countries and we’re going to make it very lenient,” Trump said. “In many cases, less than the tariffs they’ve been charging us for decades.”
While Trump said new tariff revenues would be put to use in reducing U.S. debt and “to build things,” U.S. investment markets reacted negatively on Wednesday ahead of the press conference when news of Trump’s announcement was released.
At the end of regular trading on Wednesday, the S&P 500 had lost 1.12% and the Dow Jones Industrial Average fell 0.31%. The tech-heavy Nasdaq Composite was down over 2% at the end of the trading day. Major tech concerns such as Meta and Amazon dropped more than 2%, while Alphabet lost more than 3%, per CNBC. Tesla’s share price slid more than 5% on the day.
Big April 2 tariff announcement will be softer than expected
On Monday, administration officials were signaling that Trump’s April 2 tariff announcement, which was earlier anticipated to be a sweeping global decree, is more likely to target a group of the most significant U.S. international trade partners.
Trump officials publicly acknowledged in recent days that the list of target countries may not be universal, and that other existing tariffs, like on steel, may not necessarily be cumulative, which would substantially lower the tariff hit to those sectors, per a report from Bloomberg. That includes comments from Trump himself, who has increasingly focused his remarks on the reciprocal measures.
Will car prices go up?
Last year, about half of the 16 million light-duty vehicles sold in the U.S. were imported, according to a Wall Street Journal report. Of those imports, about half came from plants in Canada and Mexico and the other half from factories outside North America. Automobiles imported to the U.S. from Canada and Mexico are currently protected from tariff levies under the U.S.-Mexico-Canada Agreement that Trump signed in 2020.
The steep new tariffs could have impacts far beyond the targeted industries, economists and industry experts have warned, and U.S. consumers could see new car prices jump by thousands of dollars, according to a CNN report.