US auto tariffs and other reciprocal tariffs in effect

In the latest chapter of the US tariff superstory, President Trump followed up on his promise to announce a reciprocal tariff structure an April 2, and for the tariffs to begin taking effect on April 3. In addition to the previously announced 25% autos import tariffs, a broad-based 10% tariff on most goods went into effect on April 3.

Further, reciprocal tariffs customized for most countries go into effect on April 9, many at much higher rates than the baseline 10%. The country-specific tariffs vary widely and are meant to address non-tariff barriers as well as matching direct tariffs.

These tariffs are not in addition to the 25% US auto tariffs, though the White House had made statements prior to April 2 that indicated they could be. For the auto industry, if reciprocal and autos tariffs were assessed on the same product coming in, the actual autos tariff could have been 45% from the European Union, for example, as the EU’s reciprocal tariff rate is 20%.   

With new tariffs, auto industry can choose a path forward

The US is now expected to have persistent tariffs at a high level and few exclusions as a cornerstone of the administration’s policy. While there may be some changes yet to come, we expect the tariffs to hold at a notably higher rate than today’s 2.5% most-favored nation autos tariff. The reciprocal tariffs reinforced the path.  

Though the reciprocal tariffs have little impact directly on the auto industry, these will have notable impacts on the global economy. Still, there seems to be sufficient information about the combination of reciprocal and auto tariffs for the auto industry to begin to carefully choose a path forward.  

There is every expectation that the situation will remain dynamic and fluid, but the latest White House statements have brought as much stability as has been available since the election.

Reciprocal tariff will not be applied on top of US auto tariffs

Beginning on April 5, 2025, the US will impose a baseline 10% tariff on goods from all countries. Beyond the baseline of 10%, there are individual higher tariffs on select countries which take effect on April 9, 2025. Those tariffs replace the baseline 10%.

The Administration’s executive order states, “These tariffs will remain in effect until such a time as President Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved, or mitigated.”  

The White House also claims a “modification authority.” This authority allows the Administration to react to retaliatory tariffs and encourages continued negotiation. The President can increase the tariff if a country retaliates or reduce it if the country takes other actions to reduce its tariff or non-tariff barriers on US goods. 

While there was concern that the reciprocal tariffs would be in addition to other tariffs, this is not the case. Instead, some goods are exempted. Most exempted items are related to Section 232 tariffs. This includes:  

  • Steel and aluminum articles and autos and auto parts already subject to Section 232 tariffs, though under separate orders

  • Copper, semiconductors, lumber and pharmaceuticals, which may be subject to Section 232 tariffs in the future  

  • Energy and certain minerals not available in the US.  

So, while these are exempted from the reciprocal tariff, they ultimately will be tariffed under a different order.

Canada and Mexico currently exempt from reciprocal tariff — though the 25% tariff remains

Canada and Mexico are not on the list of countries affected under this new reciprocal tariff. The good news is that a reciprocal tariff will not sit on top of the 25% tariff that the U.S. imposed under the fentanyl and immigration national security IEEPA orders, or the 25% US auto tariffs placed under Section 232 authority.

However, once Canada and Mexico are free of the IEEPA-based 25% tariff, a 12% tariff will be imposed under the reciprocal tariff order. For those keeping score, this does mean Mexico and Canada will eventually be fined a reciprocal tariff above the 10% baseline, under the currently applicable orders.

Section 232 covers US auto and auto parts tariffs as well as steel and aluminum tariffs

On March 26, 2025, the President announced the 25% tariff on autos and auto parts from all countries, including Canada and Mexico, based on a Section 232 rule that determines the tariffs are needed to defend the US economy. On March 12, 2025, the tariff on steel and aluminum of 25% was announced and remains in force and unchanged with the latest statements. 

These earlier proclamations still stand. There are no changes from the earlier statement, but the 25% tariff on autos and auto parts is applied differently for Canada and Mexico than other countries. There is a provision for vehicles from Canada and Mexico to see the tariffed value reduced by the value of any US content.  

The tariff rate remains 25%, but as an example, if there is $5,000 of U.S.-sourced content in a vehicle being imported from Canada, the value the tariff would be applied to would be the cost of the vehicle minus the $5,000 value of U.S. content.  

This element can help protect against tariffs for components which cross the borders between the US, Mexico and Canada multiple times during the manufacturing process.

US import tariffs and US auto tariffs, affected automakers

US auto tariffs could impact as much as 45% of light-duty vehicles sold in US

As we have noted in prior reports, the US imported about 45% of the light-duty vehicles sold in the US in 2024, including imports from Canada and Mexico. About 23% of that 45% were imported from outside of North America.  

Behind Mexico, South Korea is the largest exporter to the US, and then Japan. The situation with South Korean imports will affect both General Motors and Hyundai Motor Group. Tesla and Rivian are the only automakers not importing vehicles to the US from elsewhere, though will be impacted by the tariffs on auto parts and on steel and aluminum.

S&P Global Mobility expects US light-vehicle sales could migrate from 16.0 million vehicles in 2024 to between 14.5 and 15 million units annually in the coming years.

US import tariffs and US auto tariffs, 2024 US vehicle sales by manufacturing country and OEM

Medium and heavy duty commercial vehicle sector also affected

The medium and heavy duty commercial vehicle (MHCV) sector will also be impacted, though the sector has not been called out directly in these orders.

S&P Global Mobility expects that USMCA-compliant MHCVs from Canada and Mexico are covered by the IEEPA fentanyl and illegal immigration tariffs. However, as noted, the MHCV sector is also expected to be impacted by the Section 232 auto parts 25% tariff.

The MHCV sector, as it moves goods throughout the US, Canada and Mexico and has particular sensitivity to economic changes, will not emerge unscathed. S&P Global Mobility had been forecasting a recovery period in 2025 for this sector.  

With these actions, we now expect this could stall on a weaker freight outlook, soft MHCV orders and the expected tariffs on parts. The April 9 reciprocal tariffs are likely to further pinch 2025 import-export movements as well as overall US economic activity while individual truck brand organizations may face higher tariffs.  

Assuming the 25% tariff on parts does affect MHCV, this could also drive up prices indirectly. According to S&P Global Mobility, year to date Class 8 orders were one-third short of our earlier projection, before the latest tariffs.

While costs are expected to rise, we also see potential for other US executive- and legislative-branch actions to partially counter the cost-push resulting from tariffs. There is a House bill (H.R.2424) which would end a 12% Class 8 Federal Excise Tax (FET). In addition, there is potential for the EPA27 NOx/PM standard activity. Even if the standard does not see an outright repeal, steps to lessen compliance costs could improve affordability.  

Are US auto tariffs part of a new tariff normal?

These tariffs are expected to increase costs in the short term, with manufacturing changes to re-think a global manufacturing system being difficult to execute quickly.

Some automakers and suppliers will acknowledge the new reality with steps that include increasing US manufacturing. We will also see some short-term production disruption as automakers pull back production of low-volume, tariff-impacted vehicles.  

However, these changes will take time and investment. There is no quick solution, and increasing manufacturing in the US, particularly based on an artificial economic condition, will be costly and is likely to create a more expensive manufacturing environment. Retaliatory actions are just beginning to surface; those actions will add another layer of complexity to the situation.

S&P Global Mobility offers clients unique insights to navigate tariffs and more, allowing you to see opportunities others don’t. With 100+ years of automotive industry expertise, we offer tailored, ongoing advisory services designed to help you navigate tariffs and win. 

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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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