US President Donald Trump has signed an order imposing 25% tariffs on imports of automobiles and certain auto parts to the United States. This will cover passenger vehicles, including sedans, SUVs, crossovers, minivans, cargo vans, and light trucks. It will also cover key automobile parts, such as engines, transmissions, powertrain parts, and electrical components. Announcing the move, Trump justified it saying “businesses were coming back to the US so that they didn’t have to pay tariffs.” The US President also expressed confidence that the move will continue to spur growth “like you haven't seen before."
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Impact On Auto Parts Sourced From US
Going into the fine print of the order, Trump also talked about its impact on US made auto parts. He explained, “If parts are made in America and a car isn't, those parts are not going to be taxed or tariffed and we will have very strong policing... It's one number and that number is going to be used to reduce debt greatly in the United States and build things."
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$100 Billion In New Revenue To US?
White House Staff Secretary Will Scharf also justified the move by the Trump administration and shared the rationale behind it. He said, "In addition to spurring increased domestic manufacturing of cars and trucks, we expect that these tariffs will result in over $100 billion of new annual revenue to the United States of America."
Trump’s Rationale For Auto Tariff
The Trump administration has claimed that the auto tariff decision ends decades of “unfair trade practices.” Explaining it further, it claimed that for too long, America’s automobile industry had been battered by a flood of cheap imports. This, the Trump administration believes, “threatens the domestic industrial base” of the United States and “exposes it to global supply chain vulnerabilities.”
The ’Made In America’ Concerns
To illustrate its concerns, Trump administration has shared data which claims that in 1985, US owned and operated plants built 11 million automobiles—97% of overall domestic production. However, in 2024, Americans bought approximately 16 million vehicles, but HALF were imports. Of the other eight million vehicles assembled in America and not imported, only 40-50% were American made. This, the Trump administration says shows that of the 16 million cars bought by Americans, only 25% of the vehicle content could be categorised as Made in America.
