U.S. President Donald Trump said he would impose reciprocal tariffs as soon as the evening of Feb. 12 on every country that charges duties on U.S. imports, in a move that ratchets up fears of a widening global trade war and threatens to accelerate U.S. inflation. He has stood behind his word in leveling out the playing field. In addition, President Trump announced plans to impose new tariffs on automobiles, set to take effect around April 2. The mainstream media are screaming, but is the real deal.

President Donald Trump said he would unveil new tariffs on automobiles, adding to a wave of import levies as he seeks to remake global trade relationships and pressure companies to move production to the U.S.

Trump promised he was going to raise tariffs to 25% on March 12 on all imported steel and aluminum. Then 25% on all imported cars around April 2. While he’s been threatening to put higher tariffs on cars from Canada and Mexico, he’s now going to be targeting imports from Europe, Japan, and South Korea as well. Volkswagen, Hyundai-Kia, Mercedes, Nissan, and BMW have the highest percentage of imported vehicles, so they’d be impacted the most, but it would hit all automakers hard. Imports account for nearly half of all the vehicles sold in the U.S., with most of them coming from Mexico, South Korea, and Japan. 

According to data from Global Data, automakers such as Volkswagen and Hyundai-Kia rely heavily on overseas production, with 80% and 65% of their U.S. sales coming from imports, respectively.

While the president did not provide details on the scope or rates of the potential tariffs, the move aligns with his broader trade strategy to encourage domestic production and reshape global trade relations. This latest announcement follows a series of escalating tariffs across multiple industries, including steel, aluminum, and semiconductors.

Trump’s trade policies have targeted both rivals and allies, pushing for “reciprocal tariffs” on countries that impose import taxes on U.S. goods. These reciprocal tariffs, are distinct from the auto-specific levies but signal a widening effort to restructure trade agreements.

The potential impact on vehicles manufactured under the U.S.-Mexico-Canada Agreement (USMCA) remains uncertain. North America’s auto industry is built on deeply interconnected supply chains, and any disruption could result in higher costs for manufacturers and consumers. Tariffs on auto imports could lead to price increases, affect production timelines, and complicate long-standing trade relationships between the three nations.

The U.S. imports $240 billion worth of vehicles every year. A 25% tariff on them means the CBP, or Customs and Border Protection agency, would collect $60 billion as goods cross the border and hand the money over to the U.S. Treasury. But it also means that overall car prices could go up by $60 billion. And make no mistake about it. The domestic manufacturers would raise their prices to pretty much match that. 

The U.S. already imposes a tariff of 2.5% on cars imported from Europe, while Europe imposes a 10% import tariff on cars imported from the U.S. In other words, the European tariff is four times higher. The U.S. also has a 25% tariff on pickup trucks, but Europe really doesn’t make pickups. However, here’s where it gets tricky. Europe also imposes a value added tax, or VAT, on all products sold in Europe, but not if those products are exported. It’s really a tax policy designed to boost exports and hurt imports. Japan and South Korea use a value added tax as well. President Trump says he’s going to include those VATs to figure out how high the tariffs should be on cars that come from those countries. Germany has a 19% VAT, in South Korea it’s 10% and in Japan it’s 20%. Trump says he’ll lower his tariffs if other countries cut theirs and remove trade barriers. So, one thing’s for sure. This story is far from over.   

President Trump’s aggressive tariffs is a bold step in his administration’s broader strategy to address perceived imbalances in international trade. Although the administration aims to protect domestic industries and create a more favorable trade environment for U.S. exports, these aggressive measures could lead to tensions with key trading partners and have significant implications for the global economy.

The goal is to bring back auto production to the US and balance out the fees for imports and exports as the US has been taken advantage of for decades.

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