US Import Tariffs Will Reset the Automotive Value Chain

US President Donald Trump announced US tariffs of 25% on all light-duty vehicles imported into the US, with collection of tariffs to begin on April 3, 2025; for automotive parts it begins no later than May 3, 2025.

The US import tariff applies to all countries, including Canada and Mexico. However, there is also a clause allowing for a reduced tariff if the imported vehicle includes US-produced components, as long as those parts are compliant with USMCA free-trade rules of origin.

The new tariffs will be in addition to any other existing tariffs.

As the President has said that he expects no end to the US tariff on auto and auto parts imports, S&P Global Mobility experts are expecting persistent tariffs at a high level and few exclusions. Depending on the Administration’s actions in the next few days, this seems to be the new baseline for automotive trade.

Along with increasing costs for importing vehicles, costs will increase for auto manufacturing in the US, and consumer costs for vehicles will rise. 

If no revisions are made to the latest announcement, S&P Global Mobility expects US light-vehicle sales could migrate to between 14.5 and 15 million units annually in the coming years.

We do expect the tariffs as it stands today to create a reset of the automotive value chain within North America and the world. Vehicles sourced from Canada and Mexico could be subject to a lower tariff than vehicles imported from other countries to the extent they include US-produced and USMCA-compliant content This difference may help maintain some of the trade flows and investments made into the North American region.

During the president’s briefing on the subject, he was firm that these autos tariffs would stand during his presidency. While this level of tariff is poised to have massive impact on the industry and global supply chains, automakers and suppliers may be able to make decisions with more confidence on what the tariff costs will be.