New cars sit idle in a California storage lot. Photo: Justin Sullivan/Getty Images
President Trump on Wednesday announced 25% tariffs on automakers that do not produce cars in the U.S.
Why it matters: The auto industry has always loomed as one of the biggest potential casualties of the administration’s trade policies, and these levies threaten to put new pressure on consumers as prices inevitably rise.
Driving the news: Trump on Wednesday announced the tariff on cars and light trucks from the Oval Office. He said the move would encourage automakers to build plants domestically.
- “We’ll effectively be charging a 25% tariff, but if you build your car in the United States, there is no tariff,” Trump told reporters.
- “What that means is a lot of foreign car companies are going to be in great shape because they’ve already built their plant, but their plants are underutilized, so they’ll be able to expand them inexpensively and quickly,” he added.
Zoom out: The will-he-or-won’t-he trade saga this year particularly weighed on an auto industry already struggling with competition from China and a historic technology transition.
- Against that backdrop, Trump raised the prospect of tariffs on cars from other countries, amplifying the uncertainty for a globally connected industry.
Of note: About 45% of light vehicles sold in the United States are imported, per S&P Global Mobility.
The intrigue: The U.S. International Trade Commission, in early 2024, studied what would happen if the government imposed sweeping auto tariffs.
- A 25% tariff on all U.S. auto imports would reduce them by about 74% and increase average auto prices by 5%, the paper found.
This is a developing story. Check back for updates.
