(Translated and rewritten news article)
On Wednesday, March 26th, US President Trump (Donald Trump) announced a 25% new tariff on all imported passenger cars (cars not manufactured domestically in the United States), affecting nearly all car brands to varying degrees.
The 25% new tariff will take effect from 12:01 am Eastern Time on April 3rd, on top of the existing tariffs. The current basic tariff on car imports to the US is 2.5%. The White House expects the new car tariff to generate $100 billion in revenue annually.
According to research firm GlobalData, half of the cars sold in the US last year were imports. General Motors’ (GM) 46% of car sales come from imports, while Ford has a relatively lower import rate at 21%.
Many components of GM and Ford cars are sourced from outside the US, with a significant portion coming from Mexico. Prior to the clarification of the situation for whole vehicles and car parts on April 2nd, these companies may face pressure.
Tesla will face less impact as all production and assembly for the brand are done domestically in the US. Car manufacturers may increase efforts towards localized production to offset tariff costs, benefiting domestic suppliers in the long term.
As businesses reconfigure their procurement strategies and manufacturing operations, this shift could impact global supply chains.
The tariffs will apply to cars and trucks produced in countries with which the US has signed free trade agreements, including Canada, Mexico, and South Korea. These countries will be greatly affected, and Japanese and EU car producers such as Germany, Italy, and the UK will also feel the impacts.
The 25% tariff will also extend to major car components, as defined by Trump in his statement, including engines, transmission parts, powertrain components, and electrical elements. The start date for component tariffs may be a month later but will not exceed May 3rd as detailed in the forthcoming Federal Register notice.
The notice will specify the tariff codes for the components subject to tariffs, information not disclosed in Trump’s announcement.
The new tariff plan offers partial exemptions for vehicles and components complying with the USMCA origin rules, limited to the value produced in the US. For instance, a truck manufactured in Mexico with 45% US value will still face a 25% tariff on the remaining 55% of its value.
A similar concept applies to car components meeting USMCA origin rules, with non-US portions subject to taxation.
Determining these tariff specifics is complex. Until the US Department of Commerce and US Customs and Border Protection finalize the procedures for imposing tariffs on non-US products, car parts complying with USMCA regulations will remain duty-free. No deadline for this process has been specified.
BMW’s factory in San Luis Potosi, Mexico produces the 3 Series, 2 Series coupes, and M2, with almost all products being shipped to the US and other global markets.
Ford has three factories in Mexico. According to Mexico’s AMIA data, in the first half of 2024, Ford exported nearly 196,000 cars to North America, with 90% sold in the US.
In 2024, General Motors imported about 750,000 cars from Canada or Mexico to the US, a majority of which were manufactured in Mexico. These include the Chevrolet Silverado, GMC Sierra full-size pickups, and midsize SUVs. Mexican factories also produce two new electric vehicles. GM’s three Canadian factories manufacture electric vans, the Chevrolet Silverado heavy-duty trucks, V8 engines, and dual-clutch transmissions.
Honda sells 80% of its Mexican production to the US market. In November of last year, the company warned that if permanent tariffs are imposed on Mexican imports by the US, they may consider moving production elsewhere.
Kia operates a plant in Mexico, producing cars for its own brand and some Santa Fe SUVs for its subsidiary, Hyundai, for export to the US.
Mazda exported about 120,000 cars from Mexico to the US in 2023 but stated that further investment may be reconsidered if tariffs are imposed.
Nissan has two factories in Mexico, producing Sentra, Versa, and Kicks models for the US market. In the first nine months of 2024, nearly 505,000 cars were produced in Mexico for the company.
Stellantis operates assembly plants in Mexico producing Ram pickup trucks, Jeep Compass SUVs, with two assembly plants in Canada planning to resume production of new Jeep models this year.
Toyota’s two factories in Mexico manufacture Tacoma pickups, with over 230,000 sold in the US in 2023, accounting for 10% of the US market sales.
Volkswagen’s Puebla plant in Mexico produced nearly 350,000 cars in 2023, including the Jetta, Tiguan, and Taos, all exported to the US. In Canada, Volkswagen is constructing a battery super factory in Ontario scheduled to start production in 2027. Audi’s plant in San Jose Chiapa, Mexico produces the Q5, employing over five thousand workers. In the first half of 2024, about 40,000 cars were exported to the US.
Swedish company Autoliv is the world’s largest airbag and seat belt manufacturer, with around 15,000 employees in Mexico.
Tire manufacturer Michelin operates two plants in Mexico and three in Canada.
Chinese seat manufacturer Yanfeng Automotive Interiors supplies products to car manufacturers like GM and Toyota through its Mexico plant.
Other component manufacturers with plants in Mexico include Italian tire maker Pirelli, premium brake manufacturer Brembo, and Italian company Eurogroup Laminations.
Tesla encouraged Chinese suppliers to establish plants in Mexico in 2023 to provide products for its planned factory construction starting in early 2025 in Mexico, a plan not yet realized.
With rising prices for imported vehicles and components, car retailers are facing increased costs. This could lead to price hikes, weakened demand, and slowed sales.
International market-dependent suppliers may struggle to absorb tariffs or pass costs onto car manufacturers, potentially squeezing profit margins.
Analysts at JPMorgan Chase note that franchised dealers’ parts and service businesses may benefit, as higher prices may lead customers to keep their current vehicles longer, increasing the need for maintenance and upkeep.
Previously, Trump used the Section 232 of the 1962 Trade Expansion Act during the Cold War to impose a 25% tariff on steel and aluminum imports in 2018. In 2019, as president, he also conducted a national security investigation into car imports.
The US Department of Commerce found that the increasing market share of imported cars was eroding the US industrial base and domestic car manufacturers’ ability to develop advanced military technology, posing a negative impact on national security.
At that time, Trump chose not to levy tariffs but opted for negotiations with trade partners to address these concerns.
However, on Wednesday, he concluded that these negotiations had failed, intensifying the security threats posed by imports, with the revisions to USMCA and KORUS not improving the US position in car trade.
(Reference: Reuters)