Trump's 25% Auto Tariffs: Who Wins, Who Loses & What it Means for You?

In a bid to bolster domestic production, U.S. President Trump is slapping 25% tariffs on imported cars as well as auto parts like engines, powertrains and transmissions. These tariffs will take effect on April 3. However, there are some exceptions. Cars covered by the USMCA trade deal will only be taxed on their "non-U.S. content." Plus, USMCA-compliant auto parts will stay tariff-free until the Trump administration sets up a process for applying the tariffs.

While the goal is to boost vehicle manufacturing in the United States, the move is expected to disrupt the auto industry and strain supply chain systems. Ultimately, it’s the consumers who will suffer, as companies will pass the additional costs on to car buyers. Experts predict that the price of a vehicle could rise anywhere between $4,000 and $15,000, depending on how much of the added costs the carmaker would pass on to customers.

Even U.S.-assembled cars with tariff-free parts could see price increases as automakers spread costs across their lineup. Cox Automotive expects prices to jump 15-20% for tariffed vehicles, while the exempted ones could still rise about 5%. This will likely result in more affordability challenges.

As far as automakers are concerned, some will be hit harder than others. According to Bank of America, EV companies Tesla TSLA, Rivian Automotive RIVN and Lucid Group LCID won’t be impacted much by this new round of tariffs. Tesla, Rivian and Lucid manufacture all their vehicles sold in the United States domestically, with most of their parts also sourced from within the country.

Apart from Tesla, Rivian and Lucid, all other carmakers selling in the United States have some of their vehicles produced elsewhere. If we look at the two U.S.-based legacy automakers General Motors GM and Ford F, the latter is relatively better insulated from the tariff woes.

Ford imports around 20% of its total volumes. Approximately 80% of Ford’s vehicles are built in the United States and will thus remain exempted from these tariffs. Nonetheless, if Ford uses any imported parts in its U.S.-manufactured vehicles, those will still be tariffed accordingly.

Its closest rival General Motors will be more exposed to these tariffs, as it imports 55% of its vehicles, per Cox Automotive. Notably, General Motors manufactures just around 45% of the vehicles it sells in the United States, making it one of the more vulnerable automakers under the new tariff structure.

In 2024, the United States imported more than 7 million cars, primarily from Mexico, Japan, South Korea and Canada. Per BofA Global Research, the five automakers most exposed to U.S. imports, ranked from highest to lowest, are Tata Motors, Geely, Mazda, Volkswagen and Hyundai.

The impact on car prices is expected to shift consumer behavior. The average new car in the United States costs about $48,000, while the average used car is significantly cheaper at $26,000.With new car prices set to rise, more buyers may turn to the used market, widening the price gap between new and used vehicles. However, as demand for used cars increases, their prices are likely to climb as well.

New car buyers may rush to secure inventory before prices spike, leading to tighter supply. At the same time, automakers might reduce purchase incentives and adjust pricing strategies, slowing the buying frenzy. Trump has also floated the idea of making interest on car loans tax-deductible for U.S.-made vehicles. While this could provide some relief, it isn’t a great solution to tariff-driven price hikes.

With the auto market facing significant shifts, both consumers and investors will need to watch how these policies unfold in the coming months.

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This article originally published on Zacks Investment Research (zacks.com).

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