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)

U.S. forces have boarded another oil tanker in the Caribbean Sea. The announcement was made Friday by the U.S. military. The Trump administration has been targeting sanctioned tankers traveling to and from Venezuela.

The pre-dawn action was carried out by U.S. Marines and Navy, taking part in the monthslong buildup of forces in the Caribbean, according to U.S. Southern Command, which declared “there is no safe haven for criminals” as it announced the seizure of the vessel called the Olina.

Navy officials couldn’t immediately provide details about whether the Coast Guard was part of the force that took control of the vessel as has been the case in the previous seizures. A spokesperson for the U.S. Coast Guard said there was no immediate comment on the seizure.

The Olina is the fifth tanker that has been seized by U.S. forces as part of a broader effort by Trump’s administration to control the distribution of Venezuela’s oil products globally following the U.S. ouster of President Nicolás Maduro in a surprise nighttime raid.

The latest:

Richard Grenell, president of the Kennedy Center, says a documentary film about first lady Melania Trump will make its premiere later this month, posting a trailer on X.

As the Trumps prepared to return to the White House last year, Amazon Prime Video announced a year ago that it had obtained exclusive licensing rights for a streaming and theatrical release directed by Brett Ratner.

Melania Trump also released a self-titled memoir in late 2024.

Some artists have canceled scheduled Kennedy Center performances after a newly installed board voted to add President Donald Trump’s to the facility, prompting Grenell to accuse the performers of making their decisions because of politics.

Mexico President Claudia Sheinbaum says that she has asked her foreign affairs secretary to reach out directly to U.S. Secretary of State Marco Rubio or Trump regarding comments by the American leader that the U.S. cold begin ground attacks against drug cartels.

In a wide-ranging interview with Fox News aired Thursday night, Trump said, “We’ve knocked out 97% of the drugs coming in by water and we are going to start now hitting land, with regard to the cartels. The cartels are running Mexico. It’s very sad to watch.”

As she has on previous occasions, Sheinbaum downplayed the remarks, saying “it is part of his way of communicating.” She said she asked her Foreign Affairs Secretary Juan Ramón de la Fuente to strengthen coordination with the U.S.

Sheinbaum has repeatedly rebuffed Trump’s offer to send U.S. troops after Mexican drug cartels. She emphasizes that there will be no violation of Mexico’s sovereignty, but the two governments will continue to collaborate closely.

Analysts do not see a U.S. incursion in Mexico as a real possibility, in part because Sheinbaum’s administration has been doing nearly everything Trump has asked and Mexico is a critical trade partner.

Trump says he wants to secure $100 billion to remake Venezuela’s oil infrastructure, a lofty goal going into a 2:30 meeting on Friday with executives from leading oil companies. His plan rides on oil producers being comfortable in making commitments in a country plagued by instability, inflation and uncertainty.

The president has said that the U.S. will control distribution worldwide of Venezuela’s oil and will share some of the proceeds with the country’s population from accounts that it controls.

“At least 100 Billion Dollars will be invested by BIG OIL, all of whom I will be meeting with today at The White House,” Trump said Friday in a pre-dawn social media post.

Trump is banking on the idea that he can tap more of Venezuela’s petroleum reserves to keep oil prices and gasoline costs low.

At a time when many Americans are concerned about affordability, the incursion in Venezuela melds Trump’s assertive use of presidential powers with an optical spectacle meant to convince Americans that he can bring down energy prices.

Trump is expected to meet with oil executives at the White House on Friday.

He hopes to secure $100 billion in investments to revive Venezuela’s oil industry. The goal rides on the executives’ comfort with investing in a country facing instability and inflation.

Since a U.S. military raid captured former Venezuelan leader Nicolás Maduro on Saturday, Trump has said there’s a new opportunity to use the country’s oil to keep gasoline prices low.

The full list of executives invited to the meeting has not been disclosed, but Chevron, ExxonMobil and ConocoPhillips are expected to attend.

Attorneys general in five Democratic-led states have filed a lawsuit against President Donald Trump’s administration after it said it would freeze money for several public benefit programs.

The Trump administration has cited concerns about fraud in the programs designed to help low-income families and their children. California, Colorado, Minnesota, Illinois and New York states filed the lawsuit Thursday in the U.S. District Court for the Southern District of New York.

The lawsuit asks the courts to order the administration to release the funds. The attorneys general have called the funding freeze an unconstitutional abuse of power.

Iran’s judiciary chief has vowed decisive punishment for protesters, signaling a coming crackdown against demonstrations.

Iranian state television reported the comments from Gholamhossein Mohseni-Ejei on Friday. They came after Supreme Leader Ayatollah Ali Khamenei criticized Trump’s support for the protesters, calling Trump’s hands “stained with the blood of Iranians.”

The government has shut down the internet and is blocking international calls. State media has labeled the demonstrators as “terrorists.”

The protests began over Iran’s struggling economy and have become a significant challenge to the government. Violence has killed at least 50 people, and more than 2,270 have been detained.

Trump questions why a president’s party often loses in midterm elections and suggests voters “want, maybe a check or something”

Trump suggested voters want to check a president’s power and that’s why they often deliver wins for an opposing party in midterm elections, which he’s facing this year.

“There’s something down, deep psychologically with the voters that they want, maybe a check or something. I don’t know what it is, exactly,” he said.

He said that one would expect that after winning an election and having “a great, successful presidency, it would be an automatic win, but it’s never been a win.”

Hiring likely remained subdued last month as many companies have sought to avoid expanding their workforces, though the job gains may be enough to bring down the unemployment rate.

December’s jobs report, to be released Friday, is likely to show that employers added a modest 55,000 jobs, economists forecast. That figure would be below November’s 64,000 but an improvement after the economy lost jobs in October. The unemployment rate is expected to slip to 4.5%, according to data provider FactSet, from a four-year high of 4.6% in November.

The figures will be closely watched on Wall Street and in Washington because they will be the first clean readings on the labor market in three months. The government didn’t issue a report in October because of the six-week government shutdown, and November’s data was distorted by the closure, which lasted until Nov. 12.

FILE - President Donald Trump dances as he walks off stage after speaking to House Republican lawmakers during their annual policy retreat, Tuesday, Jan. 6, 2026, in Washington. (AP Photo/Evan Vucci, File)