President Trump escalated his trade war with partners when he announced this week he would impose a 25-percent tariff on foreign vehicles and automobile parts.
The president argued that tariffs would encourage foreign car producers to move production into the United States and boost American jobs, but backlash from trading partners and a hit on the U.S. economy loom as major risks.
Americans are bracing for higher prices of cars, and consumer sentiment is sagging, while allies like the European Union are weighing their response to the latest aggressive tariff.
Trump’s new tariffs could even raise the costs of U.S.-made autos, given how many auto parts are sourced from across the world.
Here are five questions surrounding Trump’s auto tariffs.
When do the tariffs take effect?
The tariffs for completed autos will go into effect April 3, the White House said in a Wednesday statement. Individual auto parts have tariffs with different effective dates, but will be in force no later than May 3.
The 25-percent import tax will be in addition to existing import fees and charges that are already in place within the supply chains of the auto industry, which is integrated across different international borders.
The White House said the tariffs will remain in place “unless such actions are expressly reduced, modified, or terminated.”
The Trump administration has canceled, walked back or delayed multiple tariff orders during the course of its trade war so far.
The president in February imposed a tariff on packages from China worth less than $800 before canceling the order amid a package pile up at U.S. ports of entry.
Trump also imposed 25-percent tariffs on goods from Canada and Mexico before exempting imports that were covered under the terms of a preexisting trade deal.
Sales of imported new autos totaled $75 billion in the fourth quarter of 2024.
How will the tariffs be applied to auto parts?
Auto parts that are compliant with current North American trading rules will not be taxed, the White House said Wednesday, until the Commerce Department, along with U.S. Customs, “establishes a process to apply tariffs to their non-U.S. content.”
Auto parts that are deemed to be “U.S. content” will also not be subject to the tariff, though they may cross international borders during the production process.
“U.S. content” is defined by the White House as “parts wholly obtained, produced entirely, or substantially transformed in the United States.”
Tom Alongi, national manufacturing practice leader at accounting firm UHY, noted in a commentary to The Hill the exemptions outlined by the Trump administration as well as the U.S. content designation, saying they could lead to confusion.
“The new tariffs create confusion and logistical nightmares for those not positioned to absorb additional cost or ramp up local production,” he said. “Automakers and suppliers will have to be flexible and agile to meet changing requirements.”
Auto parts affected will eventually include engines, transmissions, powertrain components, and electrical components, the White House said.
The prospect of untangling U.S.-made parts from foreign-made parts for taxation purposes promises to be a cumbersome one for the auto industry and the government, which is undergoing wide-ranging cuts. Individual parts like a rear suspension assembly can contain goods made across North America.
It’s not clear how long it will take for the relevant certification processes to be established and put into practice.
Read the full article published by The Hill.
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