25% Tariffs Effective from April 2; Collection Starts on the 3rd
“Car Prices from Mexico and Canada Will Increase by 8.8 Million Won”
Complex Supply Chains Lead to ‘Ambiguity in U.S.-made Car Standards’
[Washington=AP/Newsis] U.S. President Donald Trump makes a statement to reporters in the Oval Office at the White House on the 26th (local time). President Trump signed a proclamation to impose 25% tariffs on cars and light trucks made overseas, leading to inevitable price increases. 2025.03.27.
[Seoul=Newsis] Reporter Lee Hye-won = U.S. President Donald Trump has formalized the full imposition of a 25% tariff on imported cars, with expectations that this will inevitably lead to a rise in car prices in the U.S.
Some point out that the complex supply chains make the standards for ‘American-made cars’ ambiguous, increasing uncertainty in the industry.
President Trump signed a proclamation in the Oval Office on the 26th (local time) to impose a 25% tariff on cars and light trucks made overseas.
The tariff will take effect on April 2, and collection will begin on the following day, April 3.
According to the White House, the 25% tariff will apply not only to imported cars but also to major components such as engines, transmissions, drivetrains, and electronic parts, with the possibility of expanding the scope of tariff-applied items in the future.
However, automotive parts that comply with the U.S.-Mexico-Canada Agreement (USMCA) will remain tariff-free.
President Trump believes that this tariff will strengthen the U.S. automotive industry and estimates revenue of $600 billion to $1 trillion over two years.
This measure is expected to lead to inevitable car price increases in the U.S.
According to The New York Times (NYT), automotive market research firm Cox Automotive estimates that car prices from the leading car export countries, Mexico and Canada, will rise by $6,000 (approximately 8.8 million won).
Jonathan Smoke, Chief Economist at Cox Automotive, predicts that the price hike will lead to suppressed consumer purchases and reduced production by manufacturers, with a forecasted 30% reduction in cars produced at U.S. factories.
The reduction in production could likely result in temporary worker layoffs, and price increases would potentially reduce dealership sales jobs.
Smoke stated in a conference call that “almost all car production in North America will face disruptions through mid-April” and concluded that this would result in reduced production, supply shortages, and price increases.
There is also criticism that the standard for ‘American-made cars’ is ambiguous.
Since the 1994 North American Free Trade Agreement (NAFTA), automakers have established complex supply chains across the U.S., Canada, and Mexico.
Manufacturers have been operating large-scale factories to supply major parts such as engines, transmissions, seats, dashboards, and electronics to various car factories across North America.
For example, the engine and transmission of the popular General Motors (GM) sports utility vehicle (SUV) 2024 Chevrolet Blazer are produced in the U.S. but assembled in Mexico.
The turbocharged 2-liter engine of the Nissan Altima sedan is produced in Japan, while the transmission is made in a Canadian factory, but assembly takes place in Tennessee and Mississippi in the U.S.
This ambiguity is raising concerns within the industry.
Ford CEO Jim Farley expressed worries at an investor conference last month, stating, “Frankly, imposing a 25% tariff across the borders of Mexico and Canada would deal an unimaginable blow to the U.S. industry.”