Trump slaps 25% tariff on imported cars: Will your next vehicle cost $12,500 more?

2025-03-27 general

Washington, Thursday, 27 March 2025.
President Trump’s newly announced 25% tariff on imported cars and car parts is poised to shake up the automotive industry. Effective early April, the move aims to boost U.S. manufacturing. Experts predict a potential surge of up to $12,500 on foreign vehicle prices. Stocks of major automakers like GM and Ford dipped following the announcement. The White House anticipates the tariffs generating over $100 billion annually. Critics warn of higher consumer prices and retaliatory measures from trade partners.

Market reaction and stock performance

The immediate market reaction to President Trump’s tariff announcement was negative for many automakers [1]. General Motors (GM) shares, for example, experienced a notable decline of roughly 3% [3][7]. Stellantis also saw its shares drop nearly 3.6% [7]. Ford’s stock performance was slightly more resilient, showing a marginal increase [7]. However, after-hours trading indicated a broader negative trend, with GM, Stellantis, and Ford all falling by approximately 5% [1]. These initial market movements underscore investor concerns about the potential impact of tariffs on the automotive industry’s profitability and competitiveness.

Expert opinions and economic forecasts

Industry experts and economists have voiced concerns regarding the potential economic fallout from the tariffs [5]. Jennifer Safavian, CEO of Autos Drive America, stated the tariffs would increase the cost of producing and selling cars in the United States [2][4]. This increase could lead to higher prices for consumers and fewer manufacturing jobs [2][4]. Economist Mary Lovely predicts higher vehicle prices and reduced consumer choice [6][7]. Adam Crisafulli, head of Vital Knowledge, noted that Trump is committed to a ‘Tariff First’ policy, which could cause substantial disruption to the economy [5].

Potential impact on vehicle prices and consumer behavior

The tariffs are projected to significantly impact the cost of imported vehicles [6]. The average price of a car could increase by as much as $12,500 if the tariffs are fully passed on to consumers [6][7]. For some models, the price increase could range from $4,000 to $12,000 [4]. This could potentially push more households out of the new car market, forcing them to hold onto older vehicles longer [6]. Anderson Economic Group estimates the tariffs could increase vehicle costs between $2,000 and $12,200 for certain models [5].

Trade relations and retaliatory measures

The new tariffs have sparked criticism from international trade partners [7]. European Commission President Ursula von der Leyen stated that tariffs are taxes that negatively affect businesses and consumers in both the U.S. and the European Union [1][3][7]. Canadian Prime Minister Mark Carney described the tariffs as a direct attack and pledged to defend Canadian workers and companies [3][7]. These reactions raise concerns about potential retaliatory measures from other countries, which could escalate trade tensions and further disrupt global automotive supply chains [8]. Trump floated a ‘secondary tariff’ of 25% on goods from any country buying oil or gas from Venezuela [2].

Winners and losers in the tariff landscape

While the United Auto Workers union has praised the tariffs, viewing them as a step towards ending what they call a ‘free trade disaster,’ the broader impact remains uncertain [2][3]. Automakers heavily reliant on cross-border supply chains, particularly those importing from Mexico, Canada, and Asia, may face increased costs and logistical challenges [8]. Companies that manufacture vehicles primarily in the U.S. could potentially benefit from the tariffs, as President Trump stated there would be ‘absolutely no tariff’ for cars built domestically [1][4]. However, even domestic manufacturers may face higher costs for imported parts [4].

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trade war auto tariffs