President Trump announced on Wednesday that he would impose 25 percent tariffs on all cars imported into the United States, a sweeping measure aimed at revitalizing domestic manufacturing and reducing the nation’s trade imbalance.
The tariffs, set to take effect on April 2, will apply to finished cars and trucks shipped into the country, including American brands manufactured overseas.
“What we’re going to be doing is a 25 percent tariff on all cars not made in the U.S.,” Trump said during remarks from the Oval Office.
The policy appears to apply globally, without exemptions for nations with free trade agreements with the United States, such as Canada and Mexico. Trump’s administration has hinted that some countries may receive leniency but provided no clear guidance on how such exemptions would work.
The move is part of Trump’s broader push to encourage companies to establish manufacturing operations in the United States. “Anybody who has plants in the United States, it’s going to be good for,” Trump said, calling the initiative “very exciting.”
The U.S. is a major manufacturer of automobiles but foreign trade barriers limit the ability of U.S. car makers to successfully export cars made in the U.S. The total value of U.S. auto imports is around three times the value of exports.
Proponents of the tariffs argue that companies who build their cars in the United States will benefit from the policy. They also note that while consumers may face higher prices on imported vehicles, the long-term effect could be the creation of new jobs and manufacturing plants in the U.S.
The White House estimates the tariffs could generate $100 billion in annual revenue for the government, implying tariffs on $400 billion worth of car sales. The revenue could be lower if tariffs encourage Americans to buy domestic cars rather than imported cars or push foreign car-makers to do more manufacturing in the U.S.
Even large U.S. car companies, such as Ford and General Motors, could be impacted. They import substantial portions of their inventory, a strategy tariffs may force them to rethink.
It remains unclear whether the new policy will apply to auto parts as well. The administration has suggested that it may offer some leniency to certain countries, but details have yet to be finalized.