Auto tariffs force a gear change across supply chains

The Trump administration has formally implemented tariffs of 25% on imports of automobiles from April 3 and certain components from May 5 following a Section 232 review of the sector in 2019 and an updated view of imports, which “continue to threaten to impair the national security of the United States.” 

The new filing provides additional details beyond the administration’s initial announcement including precise product and country coverage as well as provisions for further expansion of duties.

US imports of the vehicles covered by the review reached 8.1 million cars, trucks and SUVs in 2024, of which 3.7 million were USMCA-eligible. This represents a 10.9% year-to-year increase in total vehicles in 2024 versus 2019, matched by a 10.6% year-to-year increase in USMCA eligible imports in the same period. 

The presidential proclamation also calls for further monitoring to “identify and impose tariffs on additional automobile parts,” suggesting the duties will be expanded in the future as was the case with steel and aluminum duties.

The duties are “in addition to any other duties, fees, exactions and charges applicable.” Those will include additional duties applied under the Section 232 programs for steel and aluminum and those applied under IEEPA to non-USMCA compliant content from Mexico and Canada. They don’t, however, include the newly announced reciprocal tariffs, which specifically exclude autos.

Duties on USMCA products, about 46.0% of US imports by vehicle in 2024, will be suspended until rules are put in place to only apply duties on the value of the non-US content in the product, indicating that Mexican and Canadian origin products only get a temporary reprieve.

Vehicle imports have fallen sharply in 2025, with imports from Canada and Mexico by unit falling by 9.2% year over year (days adjusted) in January and February combined. Other large importers, like the EU, Japan and South Korea have seen imports fall by 12.2%, 8.9% and 7.7% year over year in the same period, signaling a sharp decline in the trade of completed automobiles.

What's covered under the new duties

While carried out under the auspices of the Section 232 national security program, the inclusion of components in the list of products subject to tariffs as well as vehicles repeats a pattern seen in Section 201 “safeguarding” tariff strategies, including those applied to solar panels and washing machines to avoid just having assembly reshored.

Of the US$328.0 billion of imports covered by the new tariffs — calculated as all imports less those eligible for USMCA-compliant status and excluding computers — based on 2024 data, 44.8% are accounted for by vehicles and 55.2% by components.

Within components, the largest imports are from the mechanical parts, batteries and electrical controls categories. The list of parts includes the HS codes for computers, 8471, covering almost all personal computing devices as well as computers and computer parts used in cars.

The order specifies that the parts receiving the additional duty are those are that are “parts of passenger vehicles,” and so only a portion of the US$140.2 billion in computer imports to the US in 2024 would be eligible for the 25% rate under the automotive 232 (with the remainder being possibly subject to the other orders). Note that no computers entered the US under USMCA privileges in 2024, but that does not preclude manufacturers from importing under that status in the future.

Accurately determining the use of computer parts may prove a challenge for importers and US Customs. This means that importers of computers may face additional compliance costs, especially as many computer components could be considered “dual-use goods” and be able to be used in a variety of applications including automotive.

Parts imports will see the impact of the duties at different times depending on the part’s USMCA eligibility and when the processes for USMCA compliant goods, which will pay the 25% duty on non-US content, are announced.

For example, mechanical parts, the largest category of imports by value (excluding computers) at US$73.7 billion in 2024, saw only 19.8% of imports enter under USMCA, indicating a larger impact than a category like springs, which saw 81.5% of the US$848.8 million in imports enter under USMCA. The parts duties cover everything from bodies and suspensions to car radios and wiring.

The countries with the largest share of part imports include Mexico and mainland China, which saw US$124.3 billion and US$68.2 billion of parts imports respectively in 2024. Parts supply chains saw strong sourcing increases in Mexico, increasing by 23.6% year over year, while imports from mainland China fell in 2024 by 9.9% year over year. This likely reflects the preexisting tariff pressures on mainland China and highlights last year’s trend toward moving production into the USMCA bloc.

Mexico and mainland China accounted for 35.2% and 19.3% of total imports in 2024 respectively, followed by Taiwan and Vietnam at 8.5% and 5.6% respectively. Taiwan and Vietnam’s growth came from computer components, however, and without those their share of US imports fall to 1.8% and 1.8% in 2024 respectively — further illustrating the increasing importance of computers in car manufacturing.

The impact of pending tariffs can be seen in imports in January and February, where on days-adjusted terms imports from mainland China increased 9.1% year over year excluding computers, while imports from Mexico fell by 1.5% in the same period.

Imports of parts from Germany and South Korea also fell year over year, with German imports falling faster when computers are excluded. January and February 2025 saw similar declines in days-adjusted terms, with Germany and South Korea falling by 21.2% and 6.3% year over year excluding computers.

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