Trump places 25% tariffs on car imports, effective immediately on April 2nd

U.S. President Donald Trump has announced 25% on the import of cars manufactured outside of the country. The tariff will take affect on April 2nd, and have profound effects on OEMs, car sales, leasing companies, and fleet managers.

Tariffs on car parts will begin in May, following the tariffs applied in April to car imports. Trump claims that this will generate growth in America’s domestic automotive industry, increasing jobs and investment. “We’re going to charge countries for doing business in our country and taking our jobs, taking our wealth, taking a lot of the things that they’ve been taking over the years,” Trump stated.

Following this notion, Trump voiced a threat of retaliation against Canada and the EU if they join forces against his tariffs. “If the European Union works with Canada in order to do economic harm to the USA, large scale Tariffs, far larger than currently planned, will be placed on them both in order to protect the best friend that each of those two countries has ever had,” he wrote on social media.

Instant aftereffects

Immediate effects from his announcement were seen with automotive stocks such as Toyota and Mazda taking a hit on the Asian markets. In early morning trading on U.S. markets, most car stocks took a hit, including GM, Stellantis, and Ford. Tesla, on the other hand, was up about 1%.

Tesla’s performance is not a coincidence, as the brand will suffer minimal damage from the tariffs, given its cars sold in the U.S. are made in factories in California and Texas. However, about 25% of its components by value come from outside the U.S., so extra costs will come.

Several brands may experience effects from the imposed tariffs. About 40% of GM cars and trucks are assembled abroad, with a majority in Mexico, along with Toyota having around 1 million of their vehicles last year assembled in Mexico, Canada, and Japan. Stellantis also assembles some of their models in Mexico and Canada. 

International backlash

Several leaders across the world voiced their concerns on this matter. Canadian Prime Minister Mark Carney said: “We will defend our workers, we will defend our companies, we will defend our country, and we will defend it together.”

Robert Habeck, the German minister for economics stated the negative effect German automakers will experience. “The announcements of high tariffs on cars and car parts are bad news for German automakers, for the German economy, for the EU, but also for the U.S.”

Claudia Sheinbaum, the President of Mexico, also chimes in that her government will prepare for a response to all U.S. tariffs, including one put on steel and aluminum. 

Expert diagnoses

Pascal Serres, Founder and Managing Director of Moby-D and President of the Global Fleet Advisory Board on Latin-America, predicts the tariff-induced rise of car prices in the U.S. will benefit the rise of Asian cars in Latin America. “I am convinced that the measure will have a boomerang effect on the U.S., generating inflation on car prices for the American consumer and accelerating the growth of Asian brands in the continent.”

Fleet expert Mike Antich expands on the impact resources may face, considering the 25% tariffs Trump placed on imports of steel and aluminum on March 12th. “The biggest impact in the future will be the tariffs on steel, aluminum and copper, which will impact aftermarket upfit equipment because upfitters do not carry a large inventory of these commodities in stock. I anticipate that there will be intense pressure for upfitters to add surcharges to products to offset commodity price increases.”

With raised tariffs and counter tariffs possibly on the horizon, the automotive industry is strapping in for a turbulent future. Leasing companies and fleet managers may turn towards domestic brands when possible, to miniize the negative effects they may encounter. 

Photo Source: shutterstock_2501604651