President Trump announced a 25% tariff on imported cars Wednesday, a move he said would "lead to tremendous growth in the automotive industry." The tariff, to be implemented April 2, will apply to finished cars and trucks imported to the US, including American brands assembled in different countries, the New York Times reports. In remarks at the Oval Office, Trump seemed to rule out exemptions for vehicles from Canada and Mexico, reports the Wall Street Journal. "What we're going to be doing is a 25% tariff on all cars not made in the US," he said. Asked if the tariff could be lifted, Trump said it is "100%" permanent.
Trump said car prices would go down, though since almost half the vehicles sold in the US are imported, analysts expect prices to rise significantly. The current tariff on auto imports is 2.5%. After Trump's announcement, shares in top US automakers dropped sharply in after-hours trading, NBC News reports. European and Japanese automakers will be hit hard by the tariff, and countermeasures are expected, the Times reports. The Detroit News predicts that the "entire industry will likely face severe consequences, from higher vehicle prices to supply chain breakdowns," if high tariffs are in place for long.
Tesla, which makes all of its vehicles sold in the US in California and Texas, will be less affected than other major US automakers, but Trump said Elon Musk did not influence tariff policy and has "never asked me for a favor in business whatsoever." Tesla would be hit a lot harder if the tariff was applied to components as well as finished vehicles, the
Times notes. If the tariff is fully passed on to consumers, the average auto price could rise $12,500, according to the
AP. Trump said Wednesday that he could give car buyers a break by allowing them to deduct interest paid on auto loans from their federal income tax—as long as the vehicles were made in America.
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