Trump Administration Imposes 25% Tariff on Imported Cars, Parts

The Trump administration has officially confirmed that a 25% tariff on all imported cars and light trucks will come into effect at 00:01 AM on April 3, Eastern Time. Additionally, a 25% tariff on imported car parts will commence on May 3. This decision, detailed in a Federal Register notice, provides further specifics on the tariffs announced by Trump last week. The notice instructs the Commerce Department to establish a mechanism within 90 days to respond to requests from domestic manufacturers to add more car parts to the tax list.

The updated list includes nearly 150 categories of car parts, ranging from major components like engines, transmissions, and lithium-ion batteries to lower-priced items such as tires, shock absorbers, spark plug wires, and brake hoses. These imported parts will be subject to the 25% tariff starting from May 3. Notably, the tariffs also extend to all computer products, which are among the largest import categories by value in the U.S.

However, vehicles that comply with the rules of origin under the United States-Mexico-Canada Agreement (USMCA) will only be subject to a 25% tariff on non-U.S.-made components. This provision aims to mitigate the impact on automakers that source parts from within the USMCA region. The tariffs are expected to cover nearly $600 billion worth of imported cars and car parts annually, significantly affecting the automotive industry.

In addition to the car and car part tariffs, the U.S. has announced a 10% "baseline tariff" on all countries, effective from April 5. Furthermore, Trump has indicated that higher "reciprocal tariffs" will be imposed on countries with the largest trade deficits with the U.S., starting from April 9. However, the administration has clarified that cars and car parts already subject to tariffs under Section 232 (based on national security grounds) will not face additional baseline or reciprocal tariffs. This ensures that the 25% tariff on cars and parts will not be compounded with other existing tariffs.

This move by the Trump administration is likely to have far-reaching implications for the global automotive industry. Automakers that rely heavily on imported parts and vehicles may face increased costs and potential supply chain disruptions. The tariffs could also lead to higher prices for consumers, as the cost of new cars is expected to rise significantly. The administration's decision to exempt USMCA-compliant vehicles from additional tariffs provides some relief to automakers operating within the region, but the overall impact on the industry remains to be seen.