New auto tariffs...

Trump to announce new auto tariffs in major escalation ahead of April 2 deadline

By Elisabeth Buchwald, Chris Isidore and Vanessa Yurkevich

President Donald Trump is set to announce later on Wednesday his plan for tariffs on cars shipped to the United States, White House press secretary Karoline Leavitt told reporters.

Trump previously said he would announce auto tariffs on April 2, the day he’s expected to announce a package of reciprocal tariffs. However, earlier this week, he hinted at an earlier rollout for the auto sector.

Leavitt did not immediately share any details on the tariffs, including the rate and date they will go into effect, saying Trump will deliver that information later in the day.

This comes after the Big Three US automakers, Stellantis, Ford and General Motors, successfully lobbied for exemptions to 25% tariffs on all goods coming to the US from Canada and Mexico that were set to go into effect earlier this month.

The exemption Trump announced allowed for autos to come in duty-free if they were compliant with the terms of the United States-Mexico-Canada Agreement (USMCA) free trade agreement. Trump later applied that to all goods coming from the two countries. However, that’s set to expire on April 2, when Trump could announce higher tariff rates for the two countries and many others as part of his “Liberation Day.”

“I gave the American car companies a break because it would have been unfair if I didn’t,” Trump said last week.

The move caught the auto industry by surprise once again. An executive at one of the automakers, who spoke on background to CNN Wednesday, said they had been working with the assumption that none of the auto tariffs would take effect for another week.

“We were all kind of expecting April 2 to be our day,” said the auto executive. “But if the Trump administration has shown us anything, I mean, things are unexpected.”

Car prices likely to rise quickly

It is not immediately clear if the tariffs will be on just already assembled cars imported to the United States, or whether it will include auto parts. Under the original plans to impose tariffs on all imports from Canada and Mexico, tens of billions of dollars of auto parts would have been hit with a 25% tariffs, along with most other goods shipped here from both countries.

If the auto tariffs include parts, they could quickly raise the prices of new cars by thousands of dollars, according to industry experts. There is no such thing as an all-American car, since all depend on parts from Mexico and Canada for a significant part of their content. According to analysis by Michigan-based think tank Anderson Economic Group, the cost of producing vehicles built at US plants will rise by between $3,500 to $12,000 each.

The US government tracks what percentage of each car’s parts is made “domestically.” But under current trade law, Canadian-made parts and US-made parts are all counted as the same domestic content. Even with the broader definition of “American made,” none exceed 75%.

The North American car industry has operated for decades as if the continent is one giant country, thanks to free trade agreements signed by US presidents from Bill Clinton to Trump himself. Parts and whole vehicles have flowed freely across borders, sometimes multiple times, before they end up in an American dealership.

Even if tariffs only apply to fully assembled vehicles and not auto parts, it is likely to raise average car prices by eliminating some lower-cost options for car buyers. Some Mexican-assembled vehicles, like the Chevrolet Blazer or Honda HR-V could be priced out of the market, and automakers might decide to stop offering them altogether rather than build them at US factories. Cars built in Mexico are most often lower-priced, lower-profit models that are only able to maintain their profitability by being built with cheaper Mexican labor.

“One of the losses from tariffs tends to be a loss of product variety,” said another auto industry executive who spoke to CNN Wednesday.

It’s not only the smaller, entry-level models built in Mexico that could see price hikes. Trump’s auto tariffs could impact many models that car buyers don’t realize are imports, such as the heavy duty versions of Ram pickup trucks, which are built in a Stellantis plant in Saltillo, Mexico. Some versions of the Chevrolet Silverado are also built in Mexico. Even if the automakers shift production of those more profitable vehicles back from Mexico to US factories, it would take years to accomplish the switch.

There were a total of 4 million vehicles built in Mexico in 2024, according to data from S&P Global Mobility, of which 2.5 million, or 61%, were shipped to the United States. Most of the nation’s largest automakers have assembly plants in Mexico, including General Motors, Ford, and Stellantis, which makes cars under the Ram, Dodge, Jeep and Chrysler brands; as well as Asian automakers Toyota, Honda, Hyundai, Nissan, Mazda, Mitsubishi and German automakers Mercedes-Benz and Volkswagen.

Canadian auto plants built 1.3 million vehicles last year, of which 1.1 million, or 86%, were exported to US dealerships. But it won’t just be Canadian and Mexican workers hurt by the tariffs. If the 3.6 million cars coming from those two countries become unaffordable, it could hit US auto parts plants that supply those countries’ assembly plants.

The US exported $35.8 billion worth of parts to Mexico last year, according to federal trade data, and another $28.4 billion of parts to Canada. Parts suppliers, who employ about 550,000 workers or nearly twice as many as work in auto assembly plants, could be forced to cut back their production and staffing if Canadian and Mexican plants shut down, even temporarily.

In addition, United States car exports to Canada and Mexico were significant, with $14.9 billion going to Canada and $4.6 billion to Mexico. If those countries retaliate with their own tariffs on US-assembled vehicles, it could force some US assembly plants to scale back their own production.

Cox Automotive estimates that about 30% of North American auto production, or roughly 20,000 vehicles a day, could be halted due to tariffs, although that assumes there would be tariffs both on auto parts and assembled vehicles.