Trump to Impose 25% Permanent Tariff on Imported Cars Starting April 2
On March 26 (local time), U.S. President Donald Trump announced a permanent 25% tariff on foreign cars imported into the U.S. starting from April 2. This is the second item-specific tariff measure following the tariffs on steel and aluminum. The high tariff will be applied not only to finished vehicles but also to key components. This expansion of Trump’s tariff measures is expected to have a direct impact on South Korean companies, as South Korea is one of the top three car exporters to the U.S. and automobiles are the leading export product to the U.S. from South Korea.
Trump stated that the reciprocal tariffs set to be announced next week will be implemented generously for all countries, and hinted at the possibility of lowering tariffs on China to facilitate the sale of TikTok’s U.S. operations.
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Trump held a press conference at the Oval Office in the White House, announcing the decision to impose a 25% tariff on all cars not produced in the U.S., signing the related executive order. Previously, the U.S. had applied a 2.5% tariff on passenger and small trucks, and 25% on pickup trucks, but this will now be unified to a 25% tariff on all imported cars. He emphasized that vehicles produced in the U.S. would not be subject to tariffs.
The tariffs on automobiles will take effect on April 2 when the reciprocal tariffs are announced, and will start to be collected the next day. The accompanying proclamation specifies that the tariffs will be implemented from midnight Eastern time on April 3. The White House confirmed that the 25% tariff will apply not only to finished cars but also to major components including engines, transmissions, powertrains, and electrical parts, with these component tariffs taking effect before May 3.
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Trump also stated that this measure is “permanent” and not subject to negotiation or exemptions. The White House document officer, Will Sharp, noted that the new tariff measure is expected to generate over 100 billion USD in new tax revenue annually, indicating an intention to use the automobile tariffs as a multifaceted tool to address U.S. trade imbalances, revive manufacturing, and increase tax revenues.
This car tariff hike was anticipated even before Trump’s presidency. During his first term, he considered increasing tariffs on steel and cars but only increased the steel tariff to 25%, leaving car tariffs unchanged. However, it was later criticized for missing the opportunity to increase car tariffs. International and domestic trade experts had been predicting that Trump would raise car tariffs to 25% during his second term, as he announced the increase under Section 232 of the Trade Expansion Act, designed to restrict imports if deemed a national security threat.
‘Top Export Item to the U.S.’ South Korean Firms to Face Direct Hit
The new car tariff measure is expected to have a direct impact on companies from major car-exporting countries, including South Korea. According to the International Trade Administration (ITA) under the U.S. Department of Commerce, cars imported from South Korea to the U.S. in 2024 amounted to 36.6 billion USD, making it the third-largest after Mexico (78.5 billion USD) and Japan (39.7 billion USD). Automobiles hold the largest share of South Korea’s exports to the U.S., which amounted to a record high of 127.786 billion USD in 2024, with car exports at 34.744 billion USD, accounting for 27.1%.
The South Korean automotive industry, facing an urgent situation, may have to adjust its global production portfolio significantly. Korea GM, heavily reliant on U.S. exports, is particularly impacted, with discussions even surfacing about a possible withdrawal. Korea GM has been responsible for exporting 500,000 small SUVs annually to the U.S., but competitive pricing achieved through low labor costs, production innovation, and duty-free benefits from the Korea-U.S. FTA is expected to vanish with the high tariff. Predictions suggest GM, a U.S. company, will increase domestic production. Hyundai Motor Group announced plans to increase the production capacity of its third U.S. plant, Hyundai Motor Group Meta Plant America (HMGMA), from 300,000 to 500,000. On March 24, they also announced a new investment plan of 21 billion USD in the U.S. However, as U.S. production increases, the operating rate of domestic plants may decrease, leading to concerns about economic slowdown and job losses due to reduced exports.
Bloomberg stated that such tariffs significantly escalate the president’s trade battles and could potentially endanger major automakers in key U.S. trading partner countries like Japan, Germany, and South Korea. The tariffs could also disrupt the operations of North American automakers, which rely on a highly integrated supply network across the U.S., Mexico, and Canada.
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Trump Indicates Comprehensive Tariffs, Possible Reduction for China if TikTok Deal Moves
Trump reaffirmed the plan to impose reciprocal tariffs on April 2, targeting “all countries,” asserting that the U.S. would implement them very generously, with rates often lower than those imposed on the U.S. by other countries for decades. Although he previously mentioned the possibility of exemptions on March 24, he shifted back to applying tariffs to all countries within two days. Regarding other items like semiconductors and pharmaceuticals, he mentioned that they would not be included on April 2, but added that tariffs would be applied to pharmaceuticals and lumber, suggesting that further item-specific tariff measures may be forthcoming.
Trump also indicated a potential reduction in tariffs on China if China cooperates with the sale of TikTok’s U.S. operations. He expressed the belief that China may play a role in approving matters related to TikTok and suggested that a deal could lead to some tariff reductions or other benefits.