President Donald Trump declared on Wednesday the introduction of a 25% tariff on auto imports. This decision aims to stimulate domestic production but could financially strain automakers dependent on international supply chains.
What Happened: The tariffs, poised to generate $100 billion annually, are set to be enforced starting April 3, reported the Associated Press. The administration anticipates that the increased costs will incentivize the opening of more factories within the U.S., thereby reducing dependence on global supply chains. However, American automakers, who rely on components sourced globally, might face heightened expenses and reduced sales.
“This will continue to spur growth,” said Trump on his decision, according to the Press.
Under the USMCA trade pact covering the United States, Mexico, and Canada, the 25% tariffs would only affect non-U.S. content in autos and parts.
The administration argues that U.S. automakers have enough excess capacity to increase domestic production and bypass the tariffs. An official also pointed out that automakers have been aware of the potential tariffs since Trump’s campaign.
Shares of General Motors Co. GM dropped by over 3% on Wednesday, while Ford Motor Co. F experienced a slight uptick. Stellantis N.V. STLA, the parent company of Jeep and Chrysler, saw its stock value decline by nearly 3.6%.
International leaders, including Canadian Prime Minister Mark Carney and European Commission President Ursula von der Leyen, have criticized the tariffs, suggesting a potential escalation into a global trade conflict. Trump also proposed a tax incentive for American-made vehicles, allowing buyers to deduct auto loan interest from federal taxes.
Carney said, “This is a very direct attack.” The Prime Minister vowed to defend Canadian workers and companies. He said, “We will defend our country.”
See Also: Dollar Tree Sells Family Dollar For $1 Billion: ‘Truly Addition By Subtraction,’ Analyst Says
Why It Matters: The announcement follows Trump’s earlier hints that the tariffs might be less stringent than initially anticipated, offering some relief to investors. During a Newsmax interview, Trump suggested a more lenient approach, acknowledging minimal exceptions.
Earlier, Trump had indicated that while tariffs on automobiles were imminent, not all would be enforced by April 2. He mentioned potential exemptions for certain countries, though specifics were not provided.
Trump’s tariffs on steel, aluminum, and auto imports hurt foreign-part-dependent automakers but benefit companies with strong domestic production and supply chains. Tesla Inc. TSLA, Toyota Motor Corp. TM, BYD Company Limited BYDDY, and GM are poised to gain, while automakers reliant on cross-border supply chains face higher costs. Used car dealers like AutoNation, Inc. AN and CarMax, Inc. KMX may also benefit as new car prices rise.
Image via Shutterstock
Check out more of Benzinga’s Future Of Mobility coverage by following this link.
Read Next:
This story was generated using Benzinga Neuro and edited by Shivdeep Dhaliwal
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.