Trump's latest auto tariffs explained: What car buyers should know this year

DETROIT (AP) — President Donald Trump’s 25% tax on imported cars, light trucks and auto parts is likely to drive up prices at a time when many Americans already struggle to afford a new set of wheels. The tariffs will also force car companies to rethink what cars they make and where they make them.

Trump has been itching to tax foreign autos for years. In his first term, he declared auto imports a threat to national security, which gave him the authority to impose tariffs on them. On Wednesday, he went ahead and imposed the levies. They take effect midnight April 3.

It's the latest in a number of auto industry maneuvers by Trump during his first weeks back in the White House. Auto companies are also navigating the reversal of fuel economy standards, dialed down greenhouse gas emission standards and a host of electric vehicle policy rollbacks.

Some of the details of Trump's auto tariffs have yet to be worked out.

For example, it’s unclear whether the new auto tariffs would stack on top of 25% import taxes set to be levied next week on all goods from Canada and Mexico. That would mean cars from Canada and Mexico could potentially face new tariffs of 50%.

And for now, the Trump administration is exempting from the tariffs cars, light trucks and auto parts that qualify for duty-free treatment under the US-Mexico-Canada Agreement, a regional trade pact the president negotiated five years ago. Trump intends to narrow that exemption to content made in the United States, not Canada or Mexico. But that will require setting up processes to determine what qualifies as U.S.-made — something that could take weeks or months.

The White House also said the import tax would apply to “key'' auto parts, including engines, transmissions, powertrain parts and electrical components. And it could expand the tariffs to other auto parts “if necessary.’’

Here’s what else to know:

As automakers expanded globally, they created complicated and efficient supply chains that spanned countries. In North America, for instance, Mexico supplies low-wage labor and makes smaller, less expensive cars and trucks while Canada and the United States provide more skilled labor and technological know-how.

Trump's tariffs are intended to bring auto manufacturing back to the United States. But it won't be easy.

Rerouting the sourcing of thousands of parts that are imported to the U.S. and uprooting assembly operations would take years.

“It adds to the uncertainty facing all automakers as the industry’s supply chain is inherently global and has optimized around moving components across national borders where free trade agreements have existed in the past,” said John Paul MacDuffie, professor of management at the University of Pennsylvania.

Sam Fiorani, analyst at AutoForecast Solutions, notes that while European makers of luxury vehicles and their buyers can afford some price adjustments, "it’s the companies like Toyota, Mazda, and Subaru who import large percentages of their fleets that will take a beating.”

“Throwing tariffs on the parts of vehicles built in Mexico and Canada that aren’t sourced from the United States will hurt the profits of General Motors, Stellantis, and Ford over the next few quarters, costing them billions," he added.

Trump's tariffs — which he insists are permanent — will force companies to make hard choices.

“It’s going to have the effect of forcing companies to increase U.S. content’’ if they want to dodge the import taxes, said Richard Mojica, a trade attorney with Miller & Chevalier.

And even though Vanessa Miller, chair of the automotive team at the law firm Foley & Lardner, acknowledges that some companies will be able to pivot operations to the U.S., others are too tied to factories in Mexico or elsewhere to make the move anytime soon.

Automakers might have to stop making some vehicles because they won't be profitable with the tariffs in place. The tariffs hit "everyone in a manner that makes them rethink everything,’’ said Ivan Drury of the automotive website Edmunds. “This is around at least three or four years. We’re not looking at something you can just ride out.’’

Beata Caranci and Andrew Foran of TD Economics estimate that the tariffs could raise the average price of cars and light trucks in the United States — which totaled more than $47,000 last month — by up to $5,000 if automakers pass along the entire cost to consumers. That price hike could go higher – to as much as $10,000 – if the Trump administration applies the tax full to cars made in Mexico and Canada.

Automakers and their suppliers are only now recovering from years of instability brought on by pandemic-forced production halts, a sweeping semiconductor shortage and low inventory on dealership lots. That meant prices were sky-high, incentives were low and few deals were to be had.

During the peak of the pandemic, consumers still bought vehicles at high prices. But the piled-on tariffs could put new vehicles out of reach for many would-be buyers, especially given rising indications of potentially broader inflation ahead throughout the economy.

“Starting almost immediately, consumers will see their already expensive new vehicles cost hundreds to thousands more and those prices will escalate even more when the supplies of many key vehicles dwindle,” Fiorani said. “Imagine the price rises during the semiconductor shortage and stretch it out across every brand and manufacturer. The trickle-down effect will put smaller suppliers out of business and send many workers onto unemployment.”

By raising new vehicle prices, tariffs will likely send buyers to the used market. But with limited used inventory, an influx of buyers could rock used car prices, too. And they already average $25,000.

Lease penetration, or the number of vehicle transactions that are leases, has averaged around 30% or so over the past 10 years, according to Edmunds data.

But the industry saw low rates of leasing — nearly half the norm — particularly between May 2022 and January 2023. Fewer leased vehicles typically means fewer two- or three-year-old vehicles being put on the used-car market.

So there is likely to be a shortage of used cars just as more buyers start shopping for them.

Governor Matt Blunt, president of the American Automotive Policy Council, which represents U.S. automakers, said that manufacturers supported Trump's efforts to boost domestic auto manufacturing. But he cautioned that "it is critical that tariffs are implemented in a way that avoids raising prices for consumers and that preserves the competitiveness of the integrated North American automotive sector.

The United Auto Workers labor union applauded the tariffs. “Ending the race to the bottom in the auto industry starts with fixing our broken trade deals, and the Trump administration has made history with today’s actions,” UAW President Shawn Fain said in a statement. “These tariffs are a major step in the right direction for autoworkers and blue-collar communities across the country, and it is now on the automakers, from the Big Three to Volkswagen and beyond, to bring back good union jobs to the U.S.”

But Jennifer Safavian, president and CEO of Autos Drive America, which represents international auto manufacturers, denounced the tariffs: “The tariffs imposed today will make it more expensive to produce and sell cars in the United States, ultimately leading to higher prices, fewer options for consumers, and fewer manufacturing jobs in the U.S.”

Wiseman reported from Washington. Associated Press reporter Josh Boak contributed to this story.

Alexa St. John is an Associated Press climate reporter. Follow her on X: @alexa_stjohn. Reach her at ast.john@ap.org.

The Associated Press’ climate and environmental coverage receives financial support from multiple private foundations. AP is solely responsible for all content. Find AP’s standards for working with philanthropies, a list of supporters and funded coverage areas at AP.org.

New automobiles are loaded at the Port Newark Container Terminal in Newark, N.J., on Thursday, March 27, 2025. (AP Photo/Ted Shaffrey)

Two people shop at a Toyota dealership in El Monte, Calif., Thursday, March 27, 2025. (AP Photo/Jae C. Hong)

An aerial view shows auto dealerships in Cerritos, Calif., Thursday, March 27, 2025. (AP Photo/Jae C. Hong)

New German cars are stored at a logistic center in Duisburg, Germany, Thursday, March 27, 2025. (AP Photo/Martin Meissner)

New Toyota vehicles are stored at the Toyota Logistics Service, their most significant vehicle imports processing facility in North America, at the Port of Long Beach in Long Beach, Calif., Wednesday, March 26, 2025. (AP Photo/Damian Dovarganes)

President Donald Trump speaks to reporters in the Oval Office at the White House in Washington, Wednesday, March 26, 2025. (Pool via AP)

New vehicles are seen at an auto-processing facility at the Atlantic Terminal of the Port of Baltimore, Thursday, March 27, 2025, in Baltimore. (AP Photo/Stephanie Scarbrough)

The U.S. military struck three sites in Iran early Sunday, inserting itself into Israel’s effort to decapitating Iran's nuclear program in a risky gambit to weaken a longtime foe amid Tehran’s threat of reprisals that could spark a wider regional conflict.

The decision to directly involve the U.S. comes after more than a week of strikes by Israel on Iran that have moved to systematically eradicate the country’s air defenses and offensive missile capabilities, while damaging its nuclear enrichment facilities.

But U.S. and Israeli officials have said that American stealth bombers and a 30,000-lb. bunker buster bomb they alone can carry offered the best chance of destroying heavily-fortified sites connected to the Iranian nuclear program buried deep underground.

President Donald Trump announced the strikes. Iran’s state-run IRNA news agency reported that attacks targeted the country’s Fordo, Isfahan and Natanz nuclear sites. The agency did not elaborate. Iran's foreign minister said Iran reserves the right to retaliate.

Here is the latest:

The Magen David Adom rescue service says one of those wounded was a 30-year-old man in moderate condition and the other 10 were lightly wounded.

Shortly after the Iranian missile barrage, Israel announced its warplanes were conducting strikes on “military targets” in western Iran, without immediately elaborating.

The judiciary’s Mizan news agency identified the man as Majid Mosayebi and said he was hanged on Sunday after charges of spying in exchange for cryptocurrency payments. The case wasn't previously reported.

The development raises fears of Tehran stepping up executions in the country in retaliation for the U.S. attacks. Iran is one of the world’s top executioners.

The International Atomic Energy Agency says in a message on X that there has been “no increase in off-site radiation levels” after U.S. airstrikes on Iranian nuclear sites.

“The IAEA can confirm that no increase in off-site radiation levels has been reported as of this time,” it said. The “IAEA will provide further assessments on situation in Iran as more information becomes available.”

The Israeli rescue service United Hatzalah said it was dispatching first responders. There was no immediate word on casualties or damage.

Iran has fired hundreds of missiles and drones at Israel since Israel launched a surprise attack on its military and nuclear facilities last week. Israel’s sophisticated air defenses are able to shoot down most but not all of the missiles and drones.

At least 24 people have been killed in Israel and hundreds wounded.

U.S. Sen. Chris Murphy posted on X that he and other senators received a classified briefing last week from intelligence officials who indicated that Iran did not pose an immediate threat through its nuclear program.

“Iran was not close to building a deliverable nuclear weapon,” Murphy said. “The negotiations Israel scuttled with their strikes held the potential for success.”

The Houthi rebels in Yemen are vowing to support Iran in its fight against “the Zionist and American aggression.”

Their statement called for the Muslim nations to join the holy war and act as “one front against the Zionist-American arrogance.”

The militant Palestinian group Hamas says the U.S. aid strikers on Iran are a “direct threat to international peace and security” and “a blind pursuit of the rogue Zionist occupation’s agenda.”

Iran’s ambassador to the United Nations called on Sunday for an emergency Security Council meeting for what he described as America's “heinous attacks and illegal use of force” against Iran.

In a letter, obtained by the AP, Ambassador Amir Saeid Iravani, said that the U.N.’s most powerful body must “take all necessary measures” to hold the U.S. accountable under international law and the U.N. charter.

“The Islamic Republic of Iran condemns and denounces in the strongest possible terms these unprovoked and premeditated acts of aggression, which have followed the large-scale military attack conducted by the Israeli regime on 13 June against Iran’s peaceful nuclear sites and facilities," the letter continued.

The Israeli military says it's identified missiles launched from Iran toward the territory of Israel and says its defensive systems are operating to intercept the threat.

The public has been asked to go to shelters and protected areas and remain there until further notice.

Foreign Minister Abbas Araghchi also said on X that Tehran “reserves all options” to retaliate. He's the first ranking official to comment on the strikes on Isfahan, Fordo and Natanz by the Americans.

“The events this morning are outrageous and will have everlasting consequences,” Araghchi wrote.

He added: “In accordance with the UN Charter and its provisions allowing a legitimate response in self-defense, Iran reserves all options to defend its sovereignty, interest, and people.”

Iran's semiofficial Fars news agency has published an account by one of its reporters, saying flames could be seen after the bombs hit the Fordo facility.

Fars, which is believed close to Iran’s paramilitary Revolutionary Guard, said its reporter heard anti-aircraft fire around 2:05 a.m. local time and explosions two minutes later.

“When I reached the vicinity ... the air defense system was operating intensely, and its activity was clearly visible in the sky,” the reporter said. Later on, the reporter said, "flames suddenly erupted from the direction of Fordo.”

Simultaneously with the flames, a faint trail of smoke and a significant amount of dust rose in the area, Fars quoted the reporter. It offered no photos or video showing the attack

Israeli officials lauded the strikes in sweeping and dramatic language. Israel’s president, Isaac Herzog, thanked Trump and said the strikes marked a “decisive moment between the axis of terror and evil and the axis of hope.”

Israel’s defense minister congratulated Trump on what he described as a “historic decision.”

The U.S. is stepping up evacuation flights for American citizens from Israel to Europe and continuing to draw down its staff at diplomatic missions in Iraq as fears of Iranian retaliation again U.S. interests in the Middle East grow.

Even before those airstrikes were announced by President Donald Trump on Saturday evening in Washington, the U.S. embassy in Jerusalem announced the start of evacuation flights for American civilians from Israel.

Sixty-seven American citizens left Israel on two government flights bound for Athens, Greece on Saturday and four more evacuation flights to Athens were planned for Sunday, according to an internal State Department document seen by The Associated Press.

In addition to the flights, a cruise ship carrying more than 1,000 American citizens, including several hundred Jewish youngsters who had been visiting Israel on an organized tour, arrived in Cyprus, according to the document.

— Matthew Lee

Israel’s Airport Authority announced it was closing the country’s airspace to both inbound and outbound flights in the wake of the U.S. attacks on Iranian nuclear sites.

The agency said it was shutting down air traffic “due to recent developments” and did not say for how long.

Iran said early Sunday there were “no signs of contamination” at its nuclear sites at Isfahan, Fordo and Natanz after U.S. airstrikes targeted the facilities.

Iranian state media quoted the country’s National Nuclear Safety System Center, which published a statement saying its radiation detectors had recorded no radioactive release after the strikes.

“There is no danger to the residents living around the aforementioned sites,” the statement added.

Earlier Israeli airstrikes on nuclear sites similarly have caused no recorded release of radioactive material into the environment around the facilities, the International Atomic Energy Agency has said.

The U.S. military used “bunker-buster” bombs in its attack on Iran’s Fordo nuclear fuel enrichment plant, which is built deep into a mountain, a U.S. official said. That official spoke on condition of anonymity to discuss military operations.

The 30,000-pound bunker-busting American bomb known as the GBU-57 Massive Ordnance Penetrator uses its weight and sheer kinetic force to penetrate underground and then explode. Saturday’s strikes were the first time it has been used in combat.

U.S. submarines also participated in the attacks in Iran, launching about 30 Tomahawk land attack missiles, according to another U.S. official, speaking on condition of anonymity to discuss military operations.

It was not clear what those missiles were aimed at. Two Iranian nuclear sites besides Fordo were attacked, Isfahan and Natanz.

— Lolita C. Baldor

Israeli Prime Minister Benjamin Netanyahu said in a video that Trump called him after the strikes.

“It was a very warm conversation, very emotional,” Netanyahu said.

Speaking in Hebrew, he called Trump a friend of Israel like no one before him.

“In my name, and on behalf of all citizens of Israel and on behalf of the entire Jewish world, I thank him from the bottom of my heart.”

A person illuminates a light inside a tent while spending the night in a public shelter as a precaution against possible Iranian missile attacks, in Tel Aviv, Israel, Saturday, June 21, 2025. (AP Photo/Ohad Zwigenberg)

Iranian Foreign Minister Abbas Araghchi speaks to the media as he arrives to the Council of Foreign Ministers of the Organization of Islamic Cooperation meeting, in Istanbul, Turkey, Saturday, June 21, 2025. (AP Photo/Mehmet Guzel)

FILE - Israeli Prime Minister Benjamin Netanyahu shows an illustration as he describes his concerns over Iran's nuclear ambitions during his address to the 67th session of the United Nations General Assembly at U.N. headquarters, Sept. 27, 2012. (AP Photo/Richard Drew, File)

Israeli air defense system fires to intercept missiles during an Iranian attack over Tel Aviv, Israel, Saturday, June 21, 2025. (AP Photo/Leo Correa)