Trump auto tariff: a 'hurricane-like headwind'

During the 2024 presidential campaign, Donald Trump repeatedly vowed to raise tariffs on automobiles imported into the United States.

Imports were harming the domestic auto industry, he said, and other nations were limiting imports of American vehicles. American workers and companies were getting hurt.

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Soon after his inauguration on Jan. 20, he started to threaten imports of just everything with new tariffs: French wine, Canadian lumber, Mexican produce and the like. 

On Wednesday, he made good on his auto tariffs vow. He announced the United States would impose 25% tariffs on the value all cars imported into the United States.

The move would affect all vehicle imported by European automakers especially hard, but it would also affect vehicles and parts built in Japan and South Korea. And it would affect vehicles and and parts built in Canada and Mexico and shipped into the United States even if the vehicles were built by U.S.-based companies.

Higher prices for new cars and used cars

Analysts at Wedbush Securities described the auto tariff announcement as a “hurricane-like headwind,” particularly for foreign automakers. In a note late Wednesday, the investment firm y predicted that the policy could push up the average car price between $5,000 and $10,000, The New York Times reported.

The president’s order said the tariffs will start at 12:01 a.m. on April 3 and by no later than May 3. The order puts no end date on the tariffs. Only that they would last until “they are expressly reduced, modified, or terminated.”

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That, in turn, would likely produce retaliation against the United States by the European Union, Canada and Mexico. Other than the Trump administration, no one was happy Wednesday evening  “I deeply regret the U.S. decision to impose tariffs on European automotive exports,” said Ursula von der Leyden, president of the European Commission. 

Mark Carney, the new prime minister of Canada, called the latest tariffs a “direct attack” on Canada and Canadian auto workers. He said ties between the two countries are “in the process of being broken” by Trump, the Globe and Mail newspaper in Toronto reported. 

Carney warned the new tariffs could cause substantial damage to Canada’s auto sector, which is an integral part of the operations of U.S. makers. About 80% of Canadian auto production is exported to the United States.

Before the Wednesday announcement, U.S. stocks tumbled after the White House announced the order was coming. 

Related: Stock Market Today: Stocks slide as markets seek clarity on tariff plans

The Standard & Poor’s 500 Index fell 1.1% to 5,712. The Nasdaq Composite Index dropped 2% to 17,899, and the Dow Jones industrials dropped 0.3% to 42,455.

All three indexes are down for the year. The Nasdaq is off 7.3%. The S&P 500 is down 2.9%, and the Dow is down 0.2%.

After the announcement, futures trading indicated U.S. stocks will open lower on Thursday. How much lower is not yet clear. 

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The big presence of vehicles built outside the U.S.

Nearly half of new passenger vehicles sold in the U.S. in 2024 were assembled outside the U.S., according to data from S&P Global Mobility. 

Mexico is the biggest auto exporter to the U.S., sending pickups from General Motors, Ram and Toyota as well as affordable sedans from Nissan and luxury models from BMW and Volkswagen’s Audi.

European automakers — especially Germany automakers — are believed to be most vulnerable. Mercedes-Benz  (MBGAF) , BMW  (BMWYY)  and Volkswagen  (VWAGY)  are the biggest exporters the U.S. The value of vehicles brought to the U.S. was estimated at 34.8 billion euros. That translates into about $36.7 billion. European companies sell about a quarter of their production in the U.S.  Germany’s three largest auto makers account of 73% of that total. 

General Motors  (GM)  total revenue in 2024 was $187.4 billion, including $13.6 billion in revenue for its giant financing arm. U.S. vehicle revenue was $140.5 billion, according to its 2024 annual report. 

Toyota  (TM) , Honda  (HMC) , Nissan  (NSANY) , Hyundai and others also have significant business and investments in the United States. In addition, GM, Ford Motor Co.  (F)  and Chrysler, now a subsidiary of Stellantis  (STLA)  ships parts and vehicles into and out of the United States from and to Canada and Mexico.

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