The impact of the US imposing a 25% tariff on imported cars

Trump signed an announcement at the White House on the 26th, announcing an increase of 25% tariffs on imported cars, which will be implemented from April 3. At the same time, it has been confirmed that imported auto parts will also be subject to a 25% tariff, which will take effect as early as May.

Currently, the overall automobile tariff levied by the United States is 2.5%, and the tariff levied on light trucks is about 25%, and auto products that comply with the US-Mexico-Canada Agreement's rules of origin are exempted. According to statements in the White House documents, the latest 25% of automobile tariffs are additionally imposed on the basis of the relevant taxes.

Trump said the imposition of tariffs will prompt more production to be transferred to the United States. But economists point out that tariffs will push up car prices and harm consumer interests.

In fact, it is not surprising that Trump calls himself a "trading master" and proposed these plans when he returned to the White House in January, but this move still means that the trade war initiated by the Trump administration has escalated significantly.

Economists and industry insiders generally believe that the imposition of automobile tariffs in the United States will have a major blow to the U.S. auto industry. As tariffs push up car prices, consumers will reduce their buying of cars, and a large number of automobile and parts companies may face layoffs. This tariff measure will not only directly affect the US economy, but will also affect related trading partners and even the global economy.

In response to the US's announcement of imposing tariffs on imported cars, the EU and other major U.S. trading partners expressed disappointment and are planning countermeasures.

Automobile is Canada's second largest export product, second only to oil. Canadian Prime Minister Mark Carney said the Canadian government will study how to retaliate against the United States, take measures that are in Canada's interests, and promise to produce more auto parts domestically in Canada.

He pointed out that the U.S. car tariffs are a "direct attack" on Canadian and Canadian workers, that the U.S. is no longer a reliable trading partner, and that Canada and the U.S. "The era of close ties with the U.S. is over." Carney also believes that the future Canadian government will establish a "basically different relationship" with the United States.

Japanese Prime Minister Shigeru Ishiba said in Congress on the 27th, "Japan has made great contributions to the US economy in terms of investment and employment. Is it really appropriate for the United States to impose automobile tariffs on all countries without distinction?"

Shigeru Ishiba also said that the most effective method will be considered to make the United States understand that imposing high tariffs on Japan is not in the interests of the United States. Shigeru Ishiba said that even tough measures are not beneficial.

The EU — especially Germany and Italy — has long been the major U.S. exporter of automobiles. In 2023, automobiles and parts exported to the United States will be worth 56 billion euros, accounting for 20% of the EU's automobile exports.

Investment bank Jefferies predicts that “the 25% tariff will increase the import unit price by about billion before any adjustments or countermeasures are not considered, i.e. the price of each imported car will rise by about ,600, and if it is spread over all cars sold in the United States, it will increase by ,800.”

"In the latest round of offensives, Trump has taken the toughest and easiest option, imposing a 25% tariff on all U.S. imported cars," Jefferies noted.

"Ford should be less affected than General Motors and Stellantis, because the latter accounts for a higher share of final assembly. For German automakers, the increased tariffs are estimated to account for about 2% of BMW Group revenue, 1% of Volkswagen and 10% of Porsche."

However, for the moment, heavy trucks appear to be immune to the impact.

“From what we have at this point, the announced 25% tariff seems to exclude heavy trucks. If it remains the same, it would be a better-than-expected outcome for American trucks.”

Sander van der Meer, vice president of automotive business at Geodis, said the U.S. tariff policy is "unsustainable, only temporary."

He said the strategy to deal with tariffs “legal” — “localize the entire supply chain” — will generally have a negative impact on the United States.

“Under huge cost pressures, some automakers are likely to move goods from air to sea and integrate goods, use specific ports in Europe and benefit from economies of scale.”

“As supply chains are rebuilding, U.S. consumers will face higher costs, and as U.S. manufacturers are protected by global competition, product quality may be reduced. It will take many years for automakers to adapt to the new environment – ​​factories cannot move from Asia or Europe to the United States overnight.”

“So, to avoid possible disruptions, this policy (if it must be implemented) should be better implemented in phases, allowing all automotive and parts manufacturers to invest in production facilities in the U.S..”

However, “if Trump’s tariff policy is really implemented, it will be a disaster for the automotive industry and related logistics industries.”

DNB shipping analyst Jørgen Lian said the new U.S. tariffs will hit auto ship operators more severely than automakers.

He noted, “Tariffs are a direct blow to demand for automobile transportation. The market has clearly begun to reflect the risks associated with such tariffs, but the 25% level may be higher than expected, and we believe this should have an impact on curbing U.S. import demand.”

According to Clarkson data, U.S. automobile imports reached about 0 billion in 2024, while exports were billion. The U.S. market accounts for about 35% of South Korea and Japan's exports.

"It is expected that a 20% reduction in imports from Japan, South Korea and the EU will likely reduce global cargo volume by 2% (in CEU nautical horizon)," Clarkson noted.

"Nearly half of the cars sold in the U.S. in 2024 came from imports. An increase in importer costs by 25% will further put pressure on car sales. With other conditions unchanged, U.S. car sales are expected to decline, which will negatively affect maritime volumes and thus negatively affect the earnings of auto transport companies."

As the world's largest auto ship operator, Wallenius Wilhelmsen may be hit hardest by the decline in imported U.S. cars. Data shows that Wallenius Wilhelmsen's ships (including EUKOR and ARC) have a total of 371 U.S. ports in 2024.

Wallenius Wilhemsen said, “The U.S. government’s announcement of import tariffs on automobiles and critical auto parts is expected to have an impact on manufacturers, consumers and markets.”

“Tariffs, retaliation measures taken by affected countries may affect global trade flows and may have long-term impacts on supply chains. Wallenius Wilhelmsen’s business remains diversified across markets, regions and segments and is able to adapt to the ever-changing global trade environment.”

“Wallenius Wilhelmsen is closely following the situation and has a constant conversation with its customers and stakeholders.”

In February, Wallenius Wilhelmsen CEO Lasse Kristoffersen admitted that U.S. tariffs could have a significant impact on Wallenius William sen's logistics division's operations.

He noted, “Recently, uncertainty in global trade and markets has increased, but Wallenius Wilhelmsen is fully capable of tide over this. With a solid financial position, considerable business volume and strong partnerships, we are ready for 2025 and expect another strong year.”