President Donald Trump announced on Wednesday that his administration will impose a 25% tariffs on all imported auto, significantly increasing the previous 2.5% rate. The tariffs are set to take effect on April 2, coinciding with the rollout of his broader reciprocal tariff plans.
During a White House press conference, Trump framed the tariffs as a way to revitalize domestic auto production, create jobs, and generate tax revenue to support his tax cut agenda.
“These tariffs will lead to the construction of a lot of auto plants,” Trump said from the Oval Office. “You’re going to see numbers that you haven’t seen before, both in terms of employment and manufacturing. Initially, you’ll see great construction numbers, and ultimately, you’re going to have a lot of people making a lot of cars.”
He noted that automakers with existing factories in the U.S. are largely supportive of the move, while those without domestic plants will have to adjust.
“If they have factories here, they are thrilled. If they don’t, they’re going to have to build them—otherwise, they’ll have to pay the tariffs. It’s very simple,” Trump said.
Canada quickly signaled its intention to respond with retaliatory tariffs. Ontario Premier Doug Ford criticized the decision, posting on X that Trump’s 25% tariffs on cars and light trucks “will do nothing more than increase costs for hard-working American families.”
The auto industry has also warned that higher tariffs could significantly raise the cost of vehicles for consumers. According to the Center for Automotive Research, the additional costs could lead to reduced production, job losses, and disruptions throughout the supply chain.
The U.S. imported $474 billion worth of automotive products last year, including $220 billion in passenger cars. The largest suppliers were Mexico, Japan, South Korea, Canada, and Germany—all key U.S. allies.
Cox Automotive estimated that without exemptions for imports from Canada and Mexico, the cost of a U.S.-made vehicle could rise by $3,000, while cars manufactured in Canada or Mexico could see price increases of up to $6,000.
By mid-April, the firm expects a significant slowdown in North American auto production, predicting a loss of about 20,000 vehicles per day—a roughly 30% decline.
The tariffs are expected to have far-reaching consequences for the U.S. economy, particularly in the automotive sector. Cox Automotive Chief Economist Jonathan Smoke warned that if the tariffs persist, they could lead to a decline in car sales, increased prices for both new and used vehicles, and potential elimination of certain models.
“Bottom line: lower production, tighter supply, and higher prices are around the corner, reminiscent of 2021,” Smoke said in a report.
The stock market reacted negatively to the tariff announcement, with the S&P 500 dropping 1.12% on Wednesday. Auto stocks also took a hit—Tesla shares fell 5.6%, while General Motors declined by 3.1%.
As the tariffs take effect next month, automakers, policymakers, and consumers will be watching closely to see how the industry adapts to the sweeping changes in trade policy.