The American auto industry has faced stiff competition from foreign manufacturers for years. It’s a vital sector that has employed so many Americans who are proud to see their products on the road.
The White House announced new tariffs on imported automobiles and auto parts that President Donald Trump says will protect America’s auto industry, preserve national security, and bring in $100 million in revenue. The president is invoking Section 232 of the Trade Expansion Act of 1962 to place a 25% tariff on imported automobiles and parts. The tariffs will take effect in April but no later than early May.
“The 25% tariff will be applied to imported passenger vehicles (sedans, SUVs, crossovers, minivans, cargo vans) and light trucks, as well as key automobile parts (engines, transmissions, powertrain parts, and electrical components), with processes to expand tariffs on additional parts if necessary,” the White House announced in a press release.
There are carve-outs in the tariffs for imports from Mexico and Canada based on the amount of American-made content the vehicles contain. That allowance depends on the certification of U.S. content in these automobiles and their parts, and the tariffs on these imports will delay until the administration figures out that certification process.
“USMCA-compliant automobile parts will remain tariff-free until the Secretary of Commerce, in consultation with U.S. Customs and Border Protection (CBP), establishes a process to apply tariffs to their non-U.S. content,” explains the press release.
It sounds like a complex process to determine how much of a vehicle or engine’s content is American-made and thus not subject to the tariff, and no doubt manufacturers and government officials will have their hands full. But the administration believes that this action is vital for the health and strength of the industry as well as for national security.
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“The COVID-19 pandemic exposed critical vulnerabilities and choke points in global supply chains, undermining our ability to maintain a resilient domestic industrial base,” the press release states.
“Legislation, pre-existing trade agreements like the USMCA, revisions to the U.S.-Korea Free Trade Agreement, and subsequent negotiations have not sufficiently mitigated the threat to national security posed by imports of automobiles and certain automobile parts,” the release continues.
“In 2024, the U.S. imported $219.49 billion worth of cars, a 4% year-over-year increase from 2023, according to trade data platform US Import Data,” reports Freightwaves. “Mexico was the top source of imported vehicles to the U.S. in 2024 at $49.98 billion, followed by Japan ($40.76 billion), South Korea ($38 billion), Canada ($28.4 billion) and Germany ($25.59 billion).”
According to the press release from the White House, the amount of American-made parts in our cars is alarming, which underscores why incentivizing American auto and parts manufacturing is important:
- In 2024, Americans bought approximately 16 million cars, SUVs, and light trucks, and 50% of these vehicles were imports (8 million).
- Of the other 8 million vehicles assembled in America and not imported, the average domestic content is conservatively estimated at only 50% and is likely closer to 40%.
- Therefore, of the 16 million cars bought by Americans, only 25% of the vehicle content can be categorized as Made in America.
- The United States trade deficit in automobile parts reached $93.5 billion in 2024.
Automakers are already moving some of their manufacturing to the U.S. Hyundai opened a massive new plant in South Georgia this week:
We may well see more actions like this to shore up American manufacturing to avoid tariffs and the higher vehicle costs that will result from them. More American manufacturing, more jobs, and better prices for American families is the end goal — and it’s why Americans elected President Trump.