Trump announces 25% tariffs on imported cars, ratcheting up global trade war

President Donald Trump announced on Wednesday plans to slap 25% tariffs on all imported cars, escalating a global trade war just weeks after previous tariffs touched off a market rout and triggered concern about a possible recession.

"I think our automobile industry will flourish like it hasn't before," Trump said.

The 25% tariffs will be applied to imported passenger vehicles, including cars, SUVs, minivans, cargo vans and light trucks, according to a White House fact sheet released after Trump's Oval Office remarks. The tariffs will also be applied to key imported auto parts, including engines, powertrain parts and electrical components.

The White House noted that 50% of the roughly 16 million cars purchased in the U.S. last year were imports. Of the 8 million assembled in the U.S., the White House estimated those cars only have roughly 50% domestically produced content.

"Therefore, of the 16 million cars bought by Americans, only 25% of the vehicle content can be categorized as Made in America," the White House argued in its fact sheet.

The tariffs on autos are set to go into effect at 12:01 a.m. on April 3 -- one day after Trump's planned reciprocal tariffs kick in. The tariffs on auto parts are set to go into effect no later than May 3, according to the White House proclamation.

The White House fact sheet said Trump is imposing the tariffs to protect the U.S. auto industry, "which is vital to national security and has been undermined by excessive imports threatening America's domestic industrial base and supply chains."

The U.S. already imposes a 2.5% tariff on passenger car imports and a 25% tariff on imported pickup trucks.

Impact on prices?

The auto tariffs are set to target a sector that employs more than a million U.S. workers and relies on a supply chain intricately intertwined with Mexico and Canada. Tariffs placed on the auto industry risk raising car prices for U.S. consumers, experts previously told ABC News.

Of the 16 million new cars sold in the U.S. in 2024, about 8.7 million -- or 54% -- were made in the U.S., according to Stephanie Brinley, principal automotive analyst covering North and South America for the Auto Intelligence service at S&P Global Mobility. About 7.3 million -- or 46% -- were imported.

Brinley predicted prices will go up after dealers sell through current inventory, in about 1 and ½ to 2 months, but customers won't see a direct line-item charge for tariffs on the sticker price because carmakers and dealers have some wiggle room to maneuver across product lines and inventory.

However, prices are expected to go up across the board. In addition, used car prices are poised to increase, tracking the rise in new car prices and because supply is already limited. Car insurance premiums are also about to become more expensive, experts say.

The average cost of a new imported car is expected to jump $6,000 according to Cox Automotive. And experts say the entire auto market in the U.S., even for cars made here, are expected to see price increases. Many of the more affordable vehicles sold in the U.S. come from Mexico.

Canadian prime minister: 'Direct attack'

The move upends decades of free trade between the U.S., Mexico and Canada.

Mexico and Canada make up the top two U.S. trading partners for both finished motor vehicles and car parts, according to an analysis of data from the U.S. International Trade Commission by Cato Institute, a right-leaning think tank.

In 2023, Canada and Mexico accounted for nearly $120 billion worth of U.S. motor vehicle imports, which totaled about 47% of all such vehicles imported that year. Canada and Mexico made up nearly the same share of auto parts imports that year, the Cato Institute analysis showed.

When it comes to auto parts that are covered under the free trade United States-Mexico-Canada Agreement (USMCA), importers will have the chance to "certify" the U.S. content, according to the White House fact sheet.

The 25% tariff will only apply to the value of non-U.S. content -- and only after the Commerce Department and U.S. Customs and Border Protection come up with a process to apply those tariffs, according to the fact sheet.

During a press conference held at the Ambassador Bridge, new Canadian Prime Minister Mark Carney called the measure "a direct attack on our workers" and said he would convene a meeting of his cabinet on U.S. relations to discuss trade options.

The Canadian Chamber of Commerce said in a statement: "The consequences of today's escalation in this destructive tariff war will not be contained to Canada, as much as the U.S. administration would like to pretend. Throwing away tens of thousands of jobs on both sides of the border will mean giving up North America's auto leadership role, instead encouraging companies to build and hire anywhere else but here. This tax hike puts plants and workers at risk for generations, if not forever. "

More tariffs ahead

Trump announced tariffs earlier this month on a large share of U.S. auto imports when he slapped 25% duties on Mexico and Canada, but the president soon afterward issued a delay of auto-related duties associated with that policy.

White House press secretary Karoline Leavitt previewed the fresh auto tariffs in remarks on Wednesday afternoon, sending U.S. stocks lower.

The Dow Jones Industrial Average closed down 130 points, or 0.3%, while the S&P 500 dropped 1.1%. The tech-heavy Nasdaq declined 2%.

Shares of U.S. automakers also fell. Tesla, the electric carmaker led by Trump-advisor Elon Musk, closed down 5.5%. Shares of General Motors dropped 3%.

The announcement of auto tariffs arrives days before Trump is set to issue a new round of duties on April 2. Trump has repeatedly referred to that date as "liberation day," saying a wide-ranging slate of reciprocal tariffs would rebalance U.S. trade relationships.

Speaking at the White House on Monday, Trump softened his posture, saying the reciprocal tariffs could fall short of the rate that target countries impose on U.S. goods.

"I may give a lot of countries breaks," Trump told reporters in the Oval Office. "I'm embarrassed to charge them what they've charged us."

South Korea, Japan, Mexico and Canada do not impose tariffs on U.S.-made vehicles.

The auto tariffs follow a flurry of duties imposed earlier this month. Trump slapped tariffs on China in early March, raising taxes on goods from that country to 20%. Days later, Trump imposed sweeping tariffs on all aluminum and steel imports.

The moves prompted retaliatory tariffs from China, the European Union and Canada, setting off a trade war that roiled the stock market and prompted warnings from Wall Street of a potential recession.

Economists widely expect tariffs to raise prices for consumers, since importers typically pass along a share of the tax burden to shoppers.

Speaking at a press conference in Washington, D.C., last Wednesday, Fed Chair Jerome Powell faulted tariffs for a "good part" of recent inflation.