President Donald Trump has announced a new 25% tariff on imported cars and light trucks, a move he says will help grow the U.S. economy and support American carmakers. The new tariff will start from April 2, and collection of the tax will begin the next day.
Speaking from the Oval Office, Trump said, “If you build your car in the United States, there is no tariff. But if you import it, you’ll pay a 25% duty.”
Why Is Trump Imposing This Tariff?
Trump has always supported the idea of using tariffs to protect American industries. He believes that by taxing imported vehicles, foreign carmakers will be forced to shift production to the U.S., which could create more jobs and strengthen the U.S. economy.
He claimed the tariff could bring in between $600 billion and $1 trillion in revenue over the next two years. However, White House staff secretary Will Scharf gave a more cautious estimate of about $100 billion.
Tax Deductions for U.S.-Made Cars Only
Trump also wants to make auto loan interest tax-deductible, but only for cars made in the United States. This plan would mostly help wealthier Americans, as most low- and middle-income families usually take the standard tax deduction and won’t benefit much.
How Will This Affect Car Buyers?
Experts warn that this move could lead to higher car prices in the short term. Since about half of all cars sold in the U.S. are imported, buyers may have to pay thousands more for certain models.
A report from Anderson Economic Group says car prices could rise by as much as $12,200 on some models. That’s because even cars built in the U.S. often use foreign-made parts, and restarting full domestic production will take time
Automakers and Stock Market React
Despite Trump’s promise of growth, major U.S. automakers like Ford, GM, and Stellantis saw their share prices fall after the announcement. Tesla, which has already been struggling due to weak sales and Elon Musk’s political involvement, saw its stock drop 6% in one day and is down 33% for the year.
The American Automotive Policy Council (AAPC) released a statement saying they support Trump’s vision but warned that tariffs should not raise prices or hurt the North American auto supply chain, which is part of the USMCA trade agreement.
Global Reactions to the New Tariff
Not everyone is happy about this move. Ursula von der Leyen, President of the European Commission, said the U.S. decision is harmful. She posted on social media: “Tariffs are taxes — bad for businesses, worse for consumers. We’ll keep seeking fair solutions while protecting EU interests.”
Countries like Canada, Mexico, Japan, South Korea, and Germany may also be affected since they export many cars and auto parts to the U.S.
Support from U.S. Labor and Industry Groups
Some American trade and labor groups welcomed the decision. Scott Paul, from the Alliance for American Manufacturing, said a 25% tariff is necessary to rebuild the U.S. auto industry, which has weakened over the years due to foreign imports and trade deals like NAFTA.
Shawn Fain, head of the United Auto Workers, said the tariff could bring back thousands of jobs to underused American car plants, simply by adding more shifts and production lines.
President Trump’s decision to impose a 25% tariff on imported cars is a bold move aimed at strengthening U.S. manufacturing. While it may bring more jobs and investment in the long run, car prices could rise sharply in the short term.
The policy has divided opinion—some see it as a way to boost local production, while others worry it will hurt consumers and strain international trade relationships. As the new tariff takes effect in April, its real impact will become clear in the coming months.