I’ve been writing about the auto industry for many years now, and in that time, plenty of unexpected situations have come up, and I’ve seen numerous complicated issues arise. Never in this time, however, have tariffs been such a huge issue for the auto industry; I don’t have to tell you that tariffs are impacting much of the American economy, and a lot of people are concerned about them. The auto industry, in particular, is being targeted by specific tariffs that set it apart from what’s going on with other industries. So, let’s take a look at where we’re at right now, what all of this means for different companies and car buyers, and what the future could hold. Just remember that all of this could be different by the end of the week (or even the end of the day).
A Brief Timeline of Trump’s Tariffs
In order to fully appreciate where we’re at right now with tariffs, it’s worth taking a moment to look back at the last few months and how we got here. On January 20th, Donald Trump was sworn into office as the 47th President of the United States. He immediately began talking about implementing tariffs, particularly on goods coming in from Canada and Mexico, setting an anticipated date of February 1st for those to go into effect. Sure enough, on February 1st, President Trump signed an executive order imposing a 10% tariff on goods coming in from China and a 25% tariff on goods from Canada and Mexico. Two days later, he agreed to a 30-day pause for those latter two countries.
On March 4th, the 30-day pause ended, and 25% tariffs on imports from Canada and Mexico went into effect; the tariff for goods from China was doubled to 20%. The next day, President Trump announced a one-month exemption on tariffs for goods from Mexico and Canada for US automakers; the day after, on March 6th, he extended that exemption for more imports. On March 12th, tariffs for steel and aluminum imports of 25% went into effect—these are huge components for automotive manufacturing. On March 26th, the President announced 25% tariffs on all automotive imports, regardless of where they’re coming from, to start on April 3rd.
President Trump announced “reciprocal tariffs” on April 2nd with a 10% baseline on countries across the board, with higher rates on dozens of regions, including China, South Korea, and the European Union. On April 3rd, the 25% tariffs for all automotive vehicles went into effect. In response, Canada announced a 25% tariff on all US vehicle imports. The days that followed saw an absurd back-and-forth tariff situation between the US and China, with each country increasing tariffs against the other in response; this culminated in a 145% tariff against China on April 10th. Backing up a moment, the Trump Administration announced the higher reciprocal tariff rates would be paused for 90 days on April 9th—notably, this does not include the 25% blanket tariff on the auto industry. Furthermore, a similar 25% tariff has been announced for all auto parts, set to go into effect on May 3rd.
Where Are We Now?
That was a lot to try to follow, right? Well, we’re not done yet, but at least you’ve got a pretty good grasp on the major changes and updates over the last couple of months. Where we’re at right now comes down to what you’re talking about specifically. As I said, the reciprocal tariffs are currently paused for 90 days (starting from April 9th), but that’s only one small part of the equation, and it doesn’t include China in that pause. Similarly, it doesn’t cover the 25% tariff currently in effect for all vehicles coming into the US from any other country, regardless of what their other tariffs might be. This auto tariff is its own thing.
This all being said, the President said there might be a temporary exemption coming for the auto industry tariffs on April 14th, but note that it’s just a possibility. Nothing official has been announced. So, that 25% tariff is in effect right now. Any vehicle that has come into the US from another country since April 3rd has had an additional 25% tax levied against it, paid by the importer (usually the car company bringing it into the US). This raises a natural question about how this is affecting these car companies and how they’re responding to all of this. Well…
How Are Car Companies Responding to Tariffs?
The answer to that depends entirely on what company you’re talking about because there’s been no unified front by the auto industry in response to this situation. You’ve got companies like General Motors that haven’t commented much on the tariffs and haven’t announced any price changes at this time. On the other hand, Ford has announced that customers can buy eligible 2024 and 2025 models with the discount typically reserved for Ford employees through June 2nd. Stellantis has announced similar discounts for customers shopping for Chrysler, Dodge, Jeep, and Ram models, but only through April 30th.
As you might expect, foreign companies are being hit by this situation much differently than some of the domestic brands and are responding as such. According to one German news outlet, Volkswagen plans to pause vehicle shipments to the US to avoid dealing with these tariffs; Mitsubishi has similarly paused deliveries to US dealerships at the moment. Nissan has cut some prices to try to offset the increased costs expected from this auto tariff, while major brands like Toyota and Subaru haven’t commented on the situation yet.
It’s also important to note that these tariffs don’t impact all car companies the same way. According to a report from CBS News, Tesla is likely to be the least impacted of the major brands since its vehicles sold domestically are produced in the US, and 85% of its components are domestic, too. The next closest manufacturer in this regard is Ford, which makes about 80% of its vehicles in the US, while GM builds only 45% of its vehicles here in the US that are sold domestically. Companies like Toyota, Kia, and Volkswagen make most of their vehicles either overseas or at factories in Mexico and Canada; all of these companies are massively impacted by this 25% tariff.
What Does the Future Hold for Auto Tariffs?
This is the big question, right? At the moment, one thing that’s clear is that these tariffs are real and have now started impacting the number of new vehicles available here in the US and their prices. Short-term efforts to offset these costs are in place with some brands like Ford and the Stellantis car companies, while other manufacturers have simply decided to wait and see. This is only the first wave of impact, however, as the second one will come next month when the auto parts tariff of 25% goes into effect. Even companies that build their vehicles in the US still use parts coming in from overseas; that’s going to pretty much ensure increased prices for every new vehicle sold in the US at that point.
Furthermore: increased prices for parts means that service, maintenance, and repairs will become more expensive. And, when repairs become pricier, then insurance rates go up too, since those are based on estimates for repairs or a replacement vehicle in the event of a collision. In other words: with these tariffs, you’ve got a two-fisted hit to insurance since both repairs and replacement vehicles are likely to be more expensive. So if these tariffs continue, then the result is simple: life continues to cost more for anyone with a vehicle, no matter what you drive or own, and not just when it comes to buying a new car. One look at that timeline, however, makes one thing clear: it’s impossible to say where we’ll be in another month, so check back regularly, and I’ll keep you updated!
