After several false starts, Trump’s auto tariffs are finally here — and they could make buying a new car a lot more expensive.
The announcement of the 25% tariffs on all imported passenger vehicles and key car parts, which take effect on April 2, sent foreign and domestic auto stocks tumbling.
Analysts have long warned that the levies are likely to push up car prices as the US automotive industry scrambles to respond.
Wedbush analysts said in a Wednesday note that the tariffs “would be a hurricane-like headwind to foreign (and many US) automakers and ultimately push the average price of cars up $5k to $10k depending on the make/ model/price point.”
Analysis from Anderson Economic Group reported by CNBC put the potential price hike from Trump’s levies at between $4,000 and $12,200 depending on the vehicle. EVs are likely to be hit hard due to their imported batteries and electronics.
Prior to Trump announcing a 30-day exemption for the auto industry earlier this month, JP Morgan analysts estimated that 25% tariffs on vehicle imports from Mexico and Canada alone could raise the average price of new vehicles by as much as $2,580.
Automakers are also sounding the alarm. The Alliance for Automotive Innovation, which represents major US automakers including GM and Ford, warned earlier this month that proposed import taxes could see car prices rise by as much as 25%.
GM and Ford, as well as foreign rivals such as Toyota, Nissan, and BMW, all have major production facilities in Mexico, meaning they are likely to be badly affected by the tariffs.
Barclays analysts warned earlier this month that 25% levies on auto imports from Mexico and Canada could effectively wipe out profits for Ford, GM, and Stellantis.
Automakers like Tesla that build most of their cars in the US will feel the pain too, with the tariffs extending to automobile parts including engines, powertrain parts, and “electrical components.”
Despite building their cars in the US, the likes of Tesla still source many of their components abroad. Between 20% and 25% of the components from Tesla’s 2025 model-year vehicles come from Mexico, according to regulatory filings.
Global pain
Shares in foreign automakers fell following the announcement of the tariffs, with Nissan, Toyota, and Honda down between 1.5% to 3.5%.
In Europe, BMW and Volkswagen fell slightly in morning trading, while Mercedes stock dipped 2% drop.
Economists have previously warned that increasing the tariff of cars imported from Europe to the US to 25% from the current 2.5% would lead to a sharp fall in the number of cars shipped across the Atlantic.
A January report from Oxford Economics estimated that automotive exports from Germany and Italy would decline by 7.1% and 6.6% respectively due to the tariffs. The US is the main non-EU export market for both countries.
Germany’s struggling auto industry would be hit particularly hard, with Oxford Economics estimating that total automotive production would decline by about 5.3%.
That’s not a scenario manufacturers including VW — already grappling with excess capacity and mulling factory closures to cut costs — will be looking forward to.
JENS SCHLUETER / AFP
US tariffs on vehicles built in China have previously led to European automakers delaying the launch of new models in the US — and in the case of Chinese automakers like BYD, avoiding America entirely.
The Trump administration’s latest trade war escalation also raises the prospect that Europe, Japan, and South Korea may retaliate with their own tariffs on US car exports.
After Trump revealed the 25% auto tariffs, Japan’s prime minister vowed that “every option” was on the table as the country considered its response.
Germany’s economy minister, meanwhile, called on the EU to deliver a “decisive response” to the tariffs, while South Korea said it would announce emergency measures next month.
