Automakers Brace for Impact as Tariffs Begin on April 3rd, 2025

Starting today, April 3, 2025, tariffs on imported vehicles take effect under a policy enacted by President Trump. The administration expresses that these tariffs will encourage automakers to shift production back to the United States, creating new jobs and boosting domestic manufacturing. However, industry analysts warn that the added costs could drive up new car price tags by thousands of dollars for American consumers. 

While the tariffs broadly apply to imported vehicles, certain exemptions exist for cars manufactured in Mexico or Canada, granted they meet the conditions outlined in existing free trade agreements. Additionally, automakers will not face duties on key components—such as engines, transmissions, and batteries—if those parts were originally made in the U.S. and later installed in vehicles assembled in Mexico or Canada. These exemptions may help offset some financial strain on manufacturers, but concerns remain about the broader impact on market stability and vehicle affordability.

Even those who don’t purchase new cars will feel the effects of these tariffs, as the cost of essential auto parts like tires, brake pads, and oil filters is expected to rise. As The New York Times reports, “The 25 percent duty applies to all cars assembled outside the United States. Starting May 3, the tariff will also apply to imported auto parts, which will add to the cost of cars assembled domestically as well as auto repairs.” This means consumers will not only face higher new vehicle prices but also increased service fees and rising costs for imported parts needed for repairs and maintenance. As a result, more buyers may turn to the used car market, increasing demand and driving up prices for pre-owned vehicles, as noted in our previous industry news brief called Tariff Impact on the Auto Industry: Rising Costs and Potential Delays.