President Donald Trump raises his arms to supporters who gathered across the street from Trump International Golf Club in West Palm Beach to celebrate Presidents Day on Feb. 17.
Washington D.C. – The cost of buying a car in America is about to get a lot steeper. President Donald Trump announced Wednesday that his administration will impose a 25% tariff on auto imports, a move aimed at boosting domestic manufacturing but one that could instead drive up prices and strain global supply chains.
“This will continue to spur growth,” Trump told reporters, claiming the tariff would raise $100 billion in revenue annually. The White House insists this measure will push automakers to build more vehicles in the U.S., cutting reliance on a “ridiculous” supply chain that stretches across North America. The tax hike, set to take effect on April 3, applies to both finished vehicles and auto parts.
However, the immediate fallout has been severe. Shares in General Motors plunged nearly 8%, while Ford and Stellantis—owner of Jeep and Chrysler—also saw losses. In contrast, electric vehicle makers Tesla and Rivian posted gains, suggesting a shift in investor confidence toward companies less reliant on imported components.
Trump’s move aligns with his long-standing belief that tariffs will force companies to relocate manufacturing to American soil. However, industry experts warn that the reality isn’t so simple. Automakers have spent decades building global supply chains to remain competitive. Reshoring production would take years and cost billions, expenses that will likely be passed on to consumers.
“We’re looking at much higher vehicle prices,” said economist Mary Lovely, senior fellow at the Peterson Institute for International Economics. “We’re going to see reduced choice… These kinds of taxes fall more heavily on the middle and working class.”
With the average price of a new car already hovering around $49,000, the tariffs could add an estimated $12,500 to the cost of imported vehicles, further feeding inflation. For many, this could mean holding onto aging cars rather than upgrading.
The international backlash has been swift. Canadian Prime Minister Mark Carney called the tariffs a “very direct attack” and vowed retaliation, while European Commission President Ursula von der Leyen warned the EU would take steps to protect its industries. The White House has signaled it is ready for a trade war, with Trump threatening “far larger than currently planned” tariffs if allies push back.
To soften the blow, Trump proposed allowing Americans to deduct auto loan interest from their taxes—so long as their vehicle was made in the U.S. But this incentive might not be enough to offset the broader economic impact.
With auto imports worth over $244 billion last year, primarily from Mexico, Japan, and South Korea, the tariffs could reshape global trade. Whether they bring jobs back to American factories or simply make cars more expensive remains to be seen.
