President Trump revealed a new 25% tariff on foreign-made automobiles on Wednesday, affecting approximately half of all vehicles sold in the United States. He justified the measure as a way to promote domestic manufacturing.
During an announcement in the Oval Office, Trump declared, “this is gonna lead to the construction of a lot of plants” dedicated to building cars in the United States.
He elaborated, stating, “We’ll effectively be charging a 25% tariff, but if you build your car in the United States, there is no tariff.”
Will Scharf, the White House staff secretary, informed Trump that the initiative was expected to generate $100 billion in annual revenue. However, experts have warned that the move could significantly decrease the volume of imports.
A government official clarified that the new tariff would also apply to auto parts, with additional fees layered on top of the current 2.5% tariff on cars and a 25% tariff on light trucks.
More than half of the vehicles sold in the United States are imported, primarily from Mexico, Canada, Japan, South Korea, and Germany.
The official specified that the tariff on Canadian and Mexican cars would be determined by the percentage of foreign parts they contain.
“If a car from Mexico comes in with 50% American parts and 50% foreign parts, the tariff will be 50% of 25%, which is 12.5%,” the official explained.
White House trade adviser Peter Navarro accused foreign countries of exploiting the U.S. market, saying, “The foreign trade cheaters have turned America into a lower-wage assembly operation for foreign parts that threatens our national security because it’s eroded our defense and manufacturing industrial base.”
Navarro further emphasized that, “Half of the roughly 16 million cars, SUVs and light trucks Americans bought in 2024 were imports — that’s 50%. Of the remaining 8 million units, more than half of these cars were assembled from foreign parts. So what that means is, less than 25% of the cars sold in America, contain US content on average. That stops right now with the Trump auto tariffs.”
The concept of a 25% tariff on foreign cars was previously analyzed by government trade experts.
A report from the U.S. International Trade Commission last year revealed that “[a] new 25% tariff on U.S. imports from outside of North America would reduce vehicle imports by 73.9%, increase average prices of vehicles in the United States by 5.0%, and increase variable profits from domestic production by 5.2%.”
While announcing the tariffs, Trump asserted that American car companies with domestic manufacturing facilities were “thrilled” about the new tariffs, which will take effect on April 2. The official added that tariffs on car parts from Canada and Mexico would be implemented later, after further studies.
Trump affirmed that the tariffs would last for the remainder of his presidency.
“Oh, this is permanent, yeah, 100%,” Trump confirmed.
He continued, saying, “I think ultimately we could probably have anywhere from $600 billion to $1 trillion [that] will be taken in over a relatively short term period, meaning a year from now, but starting right away, starting right away, I think we’ll go from 600 to a trillion within two years.”
“This is a very simple system, and the beauty of the 25 — it’s one number … And that number is going to be used to reduce debt greatly in the United States and to build things and reduce taxes. Basically, I view it as reducing taxes and also reducing debt,” Trump explained.
Earlier this month, Trump imposed 25% tariffs on imports from China, Canada, and Mexico in response to issues like fentanyl smuggling and illegal immigration, although he temporarily exempted most imports from these countries.
In addition, last month he imposed a stricter 25% tariff on steel and aluminum, removing previous exceptions.
Trump is expected to announce a range of “reciprocal” tariffs on April 2 to target imports from countries with higher taxes on U.S. goods or significant non-tariff trade barriers. He also mentioned that he would adopt a more “lenient” approach than initially anticipated.
Additionally, he has hinted at plans to impose tariffs on lumber, pharmaceuticals, computer chips, and copper.
Despite critics arguing that the tariffs could raise consumer prices and fuel inflation—especially after a 22% surge in prices during the Biden administration—Trump pointed to the low inflation he experienced during his first term, which saw the implementation of some tariffs and the threat of others to prompt international reforms.
Trump also stated on Wednesday that he might reduce tariffs on China if they agree to divest from the social media platform TikTok.
“Maybe I’ll give them a little reduction in tariffs or something to get it done,” Trump said to reporters. “Sounds like something I’d do.”
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