White House adds clarity to President Trump’s 25% auto tariff announcement

Auto parts that are USMCA-compliant will “remain tariff-free” for now. (4 min. read)

Author

Anna del Villar
March 27, 2025

There is never a dull moment in the auto industry—especially since President Trump has taken office. Wednesday afternoon, the President announced 25% tariffs on imported automobiles and auto parts, effective April 2.

Why it matters: Analysts say automakers will likely pass on some of the tariff costs to consumers. 

  • But exactly how much prices will be impacted will vary by brand and model depending on what automakers choose (or not choose) to absorb. 

  • However, the general consensus is—both new and used vehicle prices are expected to rise—hitting both foreign-made cars and U.S.-built models that rely on imported parts.

“There’s probably not a vehicle on the market today that wouldn’t be affected in some form or fashion by tariffs,” Peter Nagle, automotive economist for S&P Global Mobility, told CNN. “I would think prices would start to change in the one-to-two weeks after the tariffs go into effect.”

The reason? Automotive supply chains are deeply complex and sometimes vehicle components cross borders multiple times. And President Trump made it clear he believes this current supply system is “ridiculous.”

Driving the news: Speaking to reporters as he signed the executive order in the Oval Office—President Trump said tariffs will help the auto industry flourish.

“You’re going to see prices going down, but it’s going to go down specifically because they’re going to buy what we’re doing, incentivizing companies and even countries with companies to come into America and build,” the President said.

  • He added that the tariffs would be "permanent,” and is not interested in negotiating any exceptions.

  • According to a White House fact sheet, auto parts that are USMCA-compliant will “remain tariff-free” until Secretary of Commerce Howard Lutnick and U.S. Customs and Border Protection (CBP), “establishes a process to apply tariffs to their non-U.S. content.”

Bracing for impact: Tariffs could encourage more investment in U.S.-based manufacturing—a trend already underway at companies like Hyundai and Stellantis.

“Over time, this may contribute to a more resilient and locally rooted auto industry,” said Jessica Caldwell, Edmunds’ head of insights, in a statement sent to CDG News. 

But let’s be honest—those benefits will likely take years to materialize. Consumers—in the meantime—are focused on the near term. 

“It’s reasonable to expect that vehicle prices will rise, which presents an added challenge to an industry that is already grappling with ongoing affordability concerns,” Caldwell explained. 

Yes, and—Cox Automotive analysts are predicting tariffs will “disproportionately impact” the market’s most affordable vehicles, per a LinkedIn post from Mark Schirmer, Cox Auto’s Director of Industry Insights and Corporate Communications.

  • 40% of vehicles priced under $40,000 will be directly affected by the tariffs. And among the 20 new vehicles priced below $30,000, half are expected to be “hit hard” with 3% - 25% increases to the average transaction price.

“Half of the affordable vehicles sold in the U.S. are dependent on Mexico and Canada with added costs. Those nameplates will likely be eliminated,” said Cox Auto’s Chief Economist Jonathan Smoke on a recent Q1 industry insights and sales forecast call.

Between the lines: Automakers have more levers to pull to pass on costs beyond just price increases.

“They can simply remove some incentives that are quite lucrative,” said Ivan Drury, director of insights at Edmunds. And the first thing to go would likely be subsidized interest rates.

But at the end of the day—determining car prices is largely based on the millions of individual negotiations that take place between a car dealer and a car buyer. 

“The price agreed upon is basic economics, supply and demand,” Drury added.

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