The Trump administration has announced a 25% tariff on imported passenger vehicles and auto parts — on top of existing duties — potentially reshaping pricing, sourcing and production strategies across the auto industry.
The tariff will apply to sedans, SUVs, crossovers, minivans, cargo vans and light trucks as well as key components including engines, transmissions, powertrain systems and electrical parts. According to Commerce Department data, the U.S. imported more than $400 billion in vehicles and auto parts in 2024 alone.
The new tariff was announced in a March 26 Proclamation. It doubles existing duties on light trucks (from 25% to 50%) and hikes the rate by tenfold for imported passenger cars (from 2.5% to 27.5%).
Relief for Some, With Strings Attached
Some relief may be available under the United States-Mexico-Canada Agreement (USMCA), but only if manufacturers can document the percentage of U.S.-made content in a vehicle. For example, a vehicle made in Mexico with 50% U.S.-made parts would be subject to a 12.5% tariff rather than the full 25%. However, documentation must be exact — if U.S. Customs finds inflated claims, the full tariff kicks in retroactively and prospectively.
The administration justifies the move as a national security measure under Section 232 of the Trade Expansion Act. The White House cites persistent supply chain vulnerabilities, foreign subsidies and the declining share of U.S. vehicle production as key threats.
It’s unclear whether these tariffs will revive domestic auto manufacturing — or simply drive up prices. Industry analysts forecast an increase in vehicle prices by $3,000 to $10,000. Many vehicles assembled in North America rely on global supply chains — a single car may include up to 20,000 parts from more than 50 countries.
What This Means for Dealers, Manufacturers and Consumers
Cox Automotive has already downgraded its 2025 forecast from 16.3 million new vehicle sales to 15.6 million — a drop of 700,000 vehicles, or 4.3%. Dealers should prepare for reduced supply due to production disruptions, higher prices, shrinking incentives and the possible elimination of entire model lines.
These tariffs will likely affect anyone who owns or operates a vehicle — with increased repair costs for used cars and rising insurance premiums, especially in the aftermath of an accident.
As the possibility of lower production, tighter supply and higher prices looms large, Fox’s national Automotive Practice Group is here to counsel dealership owners and principals on the best strategies to protect their business.
For parts manufacturers — especially those with international plants — compliance and documentation just got a lot more complex. And for consumers, sticker shock may become the new normal, both at the dealership and in the repair shop.
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