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The global auto industry is reeling after President Donald Trump announced his administration will hit vehicles imported into the U.S. with a 25 percent tariff.
In the latest escalation of his trade war that he has dubbed “the beginning of Liberation Day in America,” foreign auto manufacturers will be hit the hardest, but American consumers will also be impacted.
Trump will levy duties of 25 percent on all imports of fully assembled vehicles from April 3. “I think our automobile business will flourish like it’s never flourished before,” the president said Wednesday, adding that he intends for the tariffs to be in place until the end of his term in 2029.
In 2024 the U.S. imported $214 billion worth of passenger cars, according to the Commerce Department, and roughly half of all cars sold in the U.S. are imported.
Here is what the tariffs mean for U.S. consumers and manufacturers:
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Will American consumers have to pay more for cars?
Auto industry experts warn that the tariffs will likely result in American consumers having to pay “thousands” of dollars more for vehicles.
“For auto dealers and their customers, already reeling from rising vehicle and parts prices, as well as high interest rates and insurance costs, these new tariffs pose an additional and unwelcome challenge to affordability,” American International Automobile Dealers Association president and CEO Cody Lusk said in a statement.
Lusk said the tariffs will also put added pressure on the wallets of American families. “Tariffs could directly contribute to thousands of extra dollars on sticker prices,” Lusk added.
Others agreed. “Tariffs on U.S. trading partners, who are vital to our automotive supply chains, would make it harder for average Americans to afford the new vehicles of their choice,” Mike Stanton, president of the National Auto Dealers Association, said.
“The tariffs imposed today will make it more expensive to produce and sell cars in the United States, ultimately leading to higher prices, fewer options for consumers, and fewer manufacturing jobs in the U.S.,” Jennifer Safavian, president and CEO of Autos Drive America, which represents foreign auto manufacturers like Honda and Toyota, echoed in a statement.
Goldman Sachs warned that prices on new cars could rise by $5,000 to $15,000.
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Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions, told Bloomberg that there are “very few winners” from the tariffs. “Consumers will be losers because they will have reduced choice and higher prices,” Fiorani said.
The United Auto Workers union, however, welcomed the tariffs and said they would push manufacturers to invest more in the U.S. and create more jobs.
“These tariffs are a major step in the right direction for autoworkers and blue-collar communities across the country, and it is now on the automakers, from the Big Three to Volkswagen and beyond, to bring back good union jobs to the U.S,” the union’s president Shawn Fain said in a statement.
Which countries and manufacturers will be hit the hardest?
“We’re going to charge countries for doing business in our country and taking our jobs, taking our wealth, taking a lot of things that they’ve been taking over the years,” Trump said Wednesday.
His tariffs will cause the most pain for Germany, Japan, Mexico, Canada and South Korea, all major suppliers of cars to the U.S.
Car parts from Canada and Mexico would be taxed based on the amount of non-U.S. content in the vehicle,” Politico reports, citing a White House official. But Canadian Prime Minister Mark Carney said the tariffs were still a “direct attack” on the country.
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Japan’s Prime Minister Shigeru Ishiba said “every option” was being considered in response to the tariffs and called them “extremely regrettable.” Germany, meanwhile has vowed “not to give in” as its manufacturers are set for big losses.
Shares in Porsche, Mercedes and BMW all fell sharply early Thursday. The tariffs could wipe out a quarter of 2026 earnings projected for Porsche and Mercedes, Bloomberg Intelligence estimates. The financial outlet warns that the German manufacturers could raise prices as a result. A quarter of their sales come from the U.S.
Do the tariffs impact Tesla?
The president was asked Wednesday whether the tariffs will be good for Elon Musk’s Tesla. “I think they may…it could be neutral or it could be good,” Trump replied. “Anybody that has plants in the United States it’s gonna’ be good for, in my opinion.”
In response, the billionaire claimed that Tesla is “not unscathed” by Trump’s tariffs. “The tariff impact on Tesla is still significant,” Musk said in a post on X. “To be clear, this will affect the price of parts in Tesla cars that come from other countries.”
Tesla largely produces vehicles in the U.S. and has large plants in Texas and California, though it does import some car parts from around the world.
It comes as trade-ins of Tesla vehicles reportedly hit a record high this month as the brand faces off against an ever-growing field of EV competitors.
