President Donald Trump announced on Wednesday plans to slap 25% tariffs on all imported cars, escalating a global trade war just weeks after previous tariffs touched off a market rout and triggered concern about a possible recession.
“I think our automobile industry will flourish like it hasn’t before,” Trump said.
The auto tariffs are set to target a sector that employs more than a million U.S. workers and relies on a supply chain closely intertwined with Mexico and Canada. Tariffs placed on the auto industry risk raising car prices for U.S. consumers, experts previously told ABC News.
Trump announced tariffs earlier this month on a large share of U.S. auto imports when he slapped 25% duties on Mexico and Canada, but the president soon afterward issued a delay of auto-related duties associated with that policy.
White House press secretary Karoline Leavitt previewed the fresh auto tariffs in remarks on Wednesday afternoon, sending U.S. stocks lower.
The Dow Jones Industrial Average closed down 130 points, or 0.3%, while the S&P 500 dropped 1.1%. The tech-heavy Nasdaq declined 2%.
Shares of U.S. automakers also fell. Tesla, the electric carmaker led by Trump-advisor Elon Musk, closed down 5.5%. Shares of General Motors dropped 3%.
Mexico and Canada make up the top two U.S. trading partners for both finished motor vehicles and car parts, according to a Cato Institute analysis of data from the U.S. International Trade Commission.
In 2023, Canada and Mexico accounted for nearly $120 billion worth of U.S. motor vehicle imports, which totaled about 47% of all such vehicles imported that year. Canada and Mexico made up nearly the same share of auto parts imports that year, the Cato Institute analysis showed.
White House Press Secretary Karoline Leavitt speaks during the daily briefing in the Brady Briefing Room of the White House in Washington, Mar. 26, 2025.
Carlos Barria/Reuters
The announcement of auto tariffs arrives days before Trump is set to issue a new round of duties on April 2. Trump has repeatedly referred to that date as “liberation day,” saying a wide-ranging slate of reciprocal tariffs would rebalance U.S. trade relationships.
Speaking at the White House on Monday, Trump softened his posture, saying the reciprocal tariffs could fall short of the rate that target countries impose on U.S. goods.
“I may give a lot of countries breaks,” Trump told reporters in the Oval Office. “I’m embarrassed to charge them what they’ve charged us.”
The auto tariffs follow a flurry of duties imposed earlier this month. Trump slapped tariffs on China in early March, raising taxes on goods from that country to 20%. Days later, Trump imposed sweeping tariffs on all aluminum and steel imports.
The moves prompted retaliatory tariffs from China, the European Union and Canada, setting off a trade war that roiled the stock market and prompted warnings from Wall Street of a potential recession.
Economists widely expect tariffs to raise prices for consumers, since importers typically pass along a share of the tax burden to shoppers.
Speaking at a press conference in Washington, D.C., last Wednesday, Fed Chair Jerome Powell faulted tariffs for a “good part” of recent inflation.