President Trump spares auto sector from reciprocal tariffs

President Donald Trump announced new sweeping tariffs Wednesday in what he has touted as a “Declaration of Economic Independence.”

The details: In an announcement in the Rose Garden, President Trump discussed what he called “kind” reciprocal tariffs as high as 49% and doubled down on the April 3, enactment of the 25% auto tariffs on all foreign-made vehicles and auto parts. 

• The reciprocal taxes—which will go into effect on April 9—include a 34% tariff on goods from China; 20% on the European Union (EU); 24% on Japan; 32% on Tiawan; 26% on India; and 49% on goods from Cambodia. 

• Trump also announced a baseline of 10% tariffs on goods coming into the U.S. from all countries to take effect April 5—as part of the sweeping measures he describes as “discounted reciprocal tariffs.” 

The good news? Automobiles and auto parts already subject to the 25% tariff are exempt from the reciprocal levies announced Wednesday.  

Zeroing in: Standing with members of the UAW—President Trump described the sweeping measures as “discounted reciprocal tariffs,”—citing several examples of how he believes the measures will benefit the American auto industry.  

• The U.S. has previously charged a 2.5% tariff on foreign-made vehicles, whereas the EU has charged the U.S. 10% tariffs and (a value added tax) of 20%—said that the levies will help reduce taxes and pay down America’s national debt, said Trump. 

• He added the vehicle tariffs imposed on the U.S.—coupled with non-monetary restrictions—have acted as “colossal” trade barriers for American manufacturers GM and Ford.

• To draw a comparison, Trump said that 81% of the cars in South Korea are made in South Korea and 90% of the cars in Japan are made in Japan.  

Why it matters: President Trump—who has also garnered the support of UAW leadership with his tariff strategy—is clearly standing firm on his position on tariffs regardless of the short-term impact, which he described as a period of “tough love” during the announcement.    

Between the lines: Trump referenced several recent announcements about investments being made by companies in the U.S.—which he credits to his enactment of tariffs— noting investment commitments by automakers Stellantis, GM, Honda, Nissan, and Hyundai.

• Stellantis, Honda, and Nissan have announced plans to invest about $20 billion in U.S. manufacturing since Trump made his sweeping tariff plans known. 

• In March, the President said GM wants to invest $60 billion in the U.S., following a meeting with GM CEO Mary Barra —though GM has yet to confirm that number. 

• Hyundai Motor Company announced last week that it will invest $21 billion to expand manufacturing in the U.S.  

Bottom line: The reciprocal tariffs, coupled with the 25% auto tariffs and the levies imposed on Canada and Mexico, are destined to disrupt every facet of the automotive sector (in some capacity), requiring every stakeholder in the business to adjust some aspect of their operations.   

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