WASHINGTON—President Donald Trump on March 26 announced 25 percent tariffs on imported cars and car parts in a move aimed at boosting domestic auto manufacturing.
Speaking to reporters at the Oval Office, Trump said cars that are made in the United States will not face tariffs.
“This will continue to spur growth like you haven’t seen,” the president said. “I think our automobile business will flourish like it’s never flourished before.”
Trump said the auto tariffs will go into effect on April 2, the same day that the United States will impose broad reciprocal tariffs on its trading partners. The president has dubbed the date America’s “Liberation Day.”
The Trump administration projects that the auto tariffs will generate more than $100 billion in annual revenues, according to White House staff secretary Will Scharf.
To ensure that vehicles are made in the United States and auto parts are not manufactured overseas, there will be “very strong policing,” Trump said.
“Right now, a car would be made here, sent to Canada, sent to Mexico, sent all over the place. It’s ridiculous,” Trump said.
The president noted that he wants Congress to pass a law so that consumers who borrow money to purchase a U.S.-made car could deduct interest payments for income tax purposes.
The president has also recently mentioned levies on lumber, pharmaceuticals, and semiconductor imports.
Trump reiterated that he plans to introduce tariffs on pharmaceutical products “to bring our pharmaceutical industry back.”
“We don’t make anything here in terms of drugs, medical drugs, different types of drugs that you need, medicines,” he said. “It’s in other countries, largely made in China. A lot of it is made in Ireland.”
During a call with reporters, a senior administration official noted that capacity utilization in the auto industry is nearly 60 percent, indicating that auto companies have ample capacity to produce more vehicles domestically.
“We want investment here in Michigan and Detroit. We want to make Detroit the Motor City. Right now, it’s the assembly city, and that’s not good enough,” the official said.
The 25 percent tariff will be in addition to “any other duties, fees, exactions, and charges applicable to such imported automobiles and certain automobile parts articles,” according to the president’s proclamation.
During the call, Peter Navarro, White House senior counselor for trade and manufacturing, pointed out that half of the nearly 16 million cars, SUVs, and light trucks that Americans purchased in 2024 were imports. And more than half of these cars were assembled from foreign-made parts. In other words, he said, less than 25 percent of the cars sold in the United States have U.S. content on average.
“Our auto industry was a critical pillar of America’s arsenal of democracy that helped win World War Two. And importantly, we were a manufacturing nation then,” Navarro said.
He then criticized what he referred to as “foreign trade cheaters,” claiming that they have turned America into a low-wage assembly hub for the auto industry.
For cars that qualify for preferential tariff treatment under the USMCA agreement with Mexico and Canada, a 25 percent tariff will apply to the value of non-U.S. parts that do not qualify for preferential treatment.
Reciprocal Tariffs
When asked about the April 2 reciprocal tariffs, Trump noted that they will be “very lenient.”“I think people are going to be very surprised,” the president said.
“It'll be, in many cases, less than the tariff that they’ve been charging us for decades.”
Ontario Premier Doug Ford immediately responded to the tariffs, warning that they would “increase costs for hard-working American families.”
“U.S. markets are already on the decline as the president causes more chaos and uncertainty. He’s putting American jobs at risk,” the premier said on social media platform X.
Markets, Companies Respond to Impending Tariffs
U.S. automakers’ shares slumped midweek after reports circulated that Trump would soon announce tariffs. Ford fell by 1 percent, General Motors declined by 1.4 percent, and Tesla Motors fell by about 6 percent.The broader financial markets also slumped. The tech-heavy Nasdaq Composite Index plunged by nearly 400 points, or 2.2 percent. The broader S&P 500 declined by about 75 points, or 1.3 percent. The blue-chip Dow Jones Industrial Average dropped by more than 200 points, or 0.5 percent.
Automakers have started considering plans to shift more car production to the United States.
Depending on the tariff rates, Volvo might move the production of some of its models to the United States. Volvo CEO Jim Rowan said the company possesses the capacity at its U.S. assembly facilities to support the shift.
“We have space, paint shops, the buildings, all that’s there,” Rowan said. “We just need to make a final decision on which models and which platforms that we would move to the USA.”
Stellantis plans to reopen a shuttered Illinois plant in 2027. Honda might manufacture its next-generation Civic hybrid in Indiana rather than in Mexico.
Over the past week, there have been mixed signals about whether these tariffs will be industry-specific or universal.
“We are going to go to them and say, ‘Look, here is where we think the tariff levels are, nontariff barriers, currency manipulation, unfair funding, labor suppression, and if you will stop this, we will not put up the tariff wall,’” Bessent said.
Investors have been optimistic about a potentially softer trade policy from Trump, with the leading benchmark averages popping after weeks of a sharp selloff.
