Donald Trump is introducing a new car bomb – 25% tariffs on foreign cars not assembled in the US. It goes into effect on April 2. Panic or opportunity?
Donald Trump is once again in the spotlight of the automotive world. This time with a new executive order, signed on Wednesday, March 26, announcing 25% tariff on all cars assembled outside the US. The measure to be applied from April 2, has a clear goal: to “strengthen the American auto industry” and – as Trump himself said – “make it more successful than ever before.” So 25% customs duties on foreign cars from April 2nd.
Such measures are not new in Trump's political repertoire, but this time it is the sharpest intervention in the automotive market so far. Any vehicle not assembled on U.S. soil, will be increased in price by an additional 25 % on the American market. And this is not a conditional threat – the president claims that the measure will be in effect permanently, at least until the end of his term.
So far? Much more bearable.
To put the new tariff into context: The US has until now imported cars from the EU with a 2.5% tariff on passenger vehicles, and with 10% customs duty on light trucks and semi-trucksThis means that it will new tariff ten times higher for passenger cars from Europe – and will significantly affect their price.
For comparison: EU taxes US vehicles with 10 % customs duty, which has long been the subject of criticism from the US, saying it is an imbalance. Trump has threatened in the past to "settle the score" - and now that moment has apparently come.
100 billion and a tax break for “Made in USA”
Trump predicts that the new tariffs will bring in revenue to the US budget 100 billion dollars additional revenue. In addition, it strives to ensure that American customers receive tax credit for purchasing vehicles manufactured in the USAThe proposal still needs to go through Congress, but if it passes, it will car loan interest for domestic vehicles have become tax-deductible.
With this, Trump wants to encourage domestic purchases and reverse the trend in which American buyers are overwhelmingly reaching for European, Japanese and Korean models.
Who will feel the consequences? Everyone. Including Americans.
The impact will be global. Prices of cars from Germany, Japan, South Korea and other countries will be in the US market inevitably higherAmong those affected will be: high-end vehicles (BMW, Mercedes-Benz, Audi, Lexus) as well as mass models, such as Toyota RAV4, Hyundai Tucson or Kia Sportage.
The confusion arises when we look at "American" cars, which not entirely assembled in the USAExample? Chevrolet Silverado, coming from factories in the US and Mexico, or Ford Maverick, which is manufactured entirely in Mexico. These models will also fall under the customs knife if they do not meet the "domestic production" conditions.
Automotive parts: the soft gray area of legislation
Trump promised that American car parts will not be taxed additionally, even though they go abroad and return as part of a vehicle. But – beware – if these parts are used in a vehicle that is assembled outside the US, entire vehicle gets a 25 % markup. The industry warns that this part will be difficult to control, as global supply chains are now extremely complex.
Industry reactions: from shock to anger
The reactions are not a surprise. Toyota stated that it was "deeply disappointed" by the measure, which will also affect American workers - Toyota has several factories in the US. BMW warns that tariffs could cripple production at their South Carolina factory, where they also make SUVs for the US market.
European Commission has already expressed concern and predicted that implementation could lead to countermeasures. Also World Trade Organization (WTO) could become the scene of legal battles between the US and other vehicle-producing countries.
European car manufacturers have a significant share of the US market, with the US being the largest export market for the European automotive industry. In 2023, European manufacturers exported vehicles and parts worth €56 billion to the US. The entire European automotive industry supports 13.8 million jobs, representing 6.1% of total employment in the EU.
Germany, as Europe's largest car manufacturer, is particularly dependent on the US market. In 2024, 24% of German exports outside the EU went to the US.
BMW is among the European manufacturers prominent in the American market. In recent years, BMW has exported approximately 225,000 vehicles to the United States, worth more than $10 billion.
The exact share of European manufacturers' sales in the US market compared to their global sales is not clearly defined in the available sources. However, it is clear that the US market represents an important segment for European car manufacturers, especially for German brands such as BMW.
For individual manufacturers such as BMW, Mercedes-Benz, Audi and Volvo, the US market represents an even larger part of their export strategy. For some premium brands, the share of sales in the US is up to 15-20% of their global sales. This is especially pronounced for brands that have production facilities in the US, such as BMW in Spartanburg, which allows for tariff avoidance and a more competitive pricing policy.
Conclusion: The price of nationalism and global dependence
Trump's action is politically clear, but economically risky. At first glance, it is a logical move in the light of protecting American industry, but in reality it may cause chain reactionwhich will affect buyers, manufacturers and traders – both in the US and around the world.
Americans will pay for many cars noticeably more, and manufacturers will be forced reorganize production processes – which is neither quick nor cheap. On top of that, the consequences of the measure seem to be less predictable than Trump himself – which in itself is a cause for concern.
So if you're thinking about buying a car with a European pedigree and you live in the US – now might be the time. After April 2nd, your dream Audi, BMW or Mercedes could become a reality in the US market. a much more expensive fantasy.
