President Trump announced Wednesday that he would impose a 25% tariff on all vehicles imported into the United States.
The tariffs scheduled to come into effect on April 2nd will apply to completed vehicles and trucks shipped domestically, including American brands manufactured overseas.
“What we're trying to do is 25% tariffs on all cars not made in the US,” Trump said in a statement from the oval office.
The policy appears to be applied worldwide without exemptions from countries with free trade agreements with the US, such as Canada and Mexico. Trump's administration suggests that while some countries may receive generosity, it did not provide clear guidance on how such exemptions work.
The move is part of Trump's broader push to encourage businesses to establish manufacturing operations in the United States. “Anyone who has plants in the US, that's a good thing,” Trump said. He called the initiative “very exciting.”
The US is a leading manufacturer of automobiles, but foreign trade barriers limit the ability of US automakers to successfully export cars made in the US.
Advocates of tariffs argue that companies building cars in the US will benefit from the policy. They also note that while consumers may face higher prices on imported vehicles, the long-term effect could be the creation of new employment and manufacturing plants in the US
The White House estimates that tariffs can generate $100 billion in government annual revenue, implying tariffs on car sales worth $400 billion. If tariffs encourage Americans to buy imported cars or encourage foreign automakers to do more manufacturing in the US, income could be lower
Even large US auto companies such as Ford and General Motors could be affected. They import a significant portion of the inventory, and the tariffs of the strategy may force them to reconsider.
It remains to be seen whether the new policy will also apply to automatic parts. The administration suggests that it may provide some degree of generosity to certain countries, but details have not yet been finalized.
