Effective April 3, 2025, the United States will apply a 25% ad valorem tariff on imported passenger vehicles (sedans, SUVs, crossovers, minivans, and cargo vans) and light trucks. For USMCA-compliant vehicles, importers may submit documentation establishing the U.S. content so that the tariff applies only to the non-U.S. content value.
Automobile parts will be subject to a 25% ad valorem tariff on a date specified in the Federal Register but no later than May 3, 2025. The president’s proclamation refers to engines, transmissions, powertrain parts, and electronic components. USMCA-compliant automobile parts will remain tariff-free until the Secretary of Commerce and the U.S. Customs and Border Protection (CBP) establish a process to apply the tariff to the portion of the non-U.S. content. It’s not known at this time whether this process will allow for tariff alleviation for USMCA-compliant content.
What we’re tracking
- Adjusting Imports of Automobiles and Automobile Parts Into the United States – The White House; posted March 25, 2025, to whitehouse.gov.
- Fact Sheet: President Donald J. Trump Adjusts Imports of Automobiles and Automobile Parts into the United States; posted March 25, 2025, to whitehouse.gov.
- Subsequent notices as published in the federalregister.gov.
The tariffs created through this proclamation are established under the Trade Expansion Act of 1962, section 232, that automobile and strategic automobile part imports threaten to impair the national security of the United States. In addition, the Trade Act of 1974, section 604, gives the president the authority to remove, modify, continue, or impose any duty rate or other import restriction.
The language for automobiles was clear: the ad valorem tariffs begin on vehicles entered for consumption or withdrawn from the warehouse for consumption on or after 12:01 a.m. ET on April 3, 2025. Ad valorem tariffs on automobile parts begin on a date specified in the Federal Register but no later than May 3, 2025. USMCA-compliant parts remain tariff-free until a process is established to apply the tariffs only to non-U.S. content.
Why it’s important
The tariffs will impact all vehicle manufacturers. Pure importers will be hit the hardest when deciding how much of the tariffs to absorb or pass through to the dealer and final customer. Domestic manufacturers will be impacted less, but the cost impacts will also be spread through their supply chain. The statutes used for these tariffs place no time limitation on the tariff actions. The president inferred in his proclamation signing press conference that the tariffs would remain in place through his presidency. As such, these tariffs will immediately impact vehicle sales and production orders as OEMs manage current inventory levels to optimize profitability. The impact will escalate as vehicle incentive levels are adjusted to offset the OEM costs.
The design of the tariffs with their USMCA provisions partially protects the North American trading block. It creates a platform to encourage early USMCA renegotiation, including new provisions, such as applying tariffs to non-U.S. content within a USMCA construct.
How it impacts you
These tariffs create the potential for greater production schedule volatility in the short term and reduced demand in the long term. There will be greater commercial tension between buyer and seller at every level over cost recovery strategies. It’s important to understand how tariff compounding impacts your cost structure; that is, how other tariffs such as steel, aluminum, Canadian, Mexican, and Chinese products start to play out in tariffs passed along by your suppliers and sub tier suppliers in your bills of material. Manufacturers must also monitor retaliatory actions by other countries that may increase their tariffs or create constraints due to export restrictions.
There will be greater demands on understanding and documenting the country of origin and applying trade terms such as “substantially transformed.” It’s clear in this proclamation and previous executive orders that there will be an increased level of enforcement associated with this administration, so it’s critical to have systems in place that enable you to accurately record the country of origin and value of content and properly document it to establish compliance.
What to expect next
An important date to remember is April 2, 2025, when the president is expected to release details on reciprocal tariffs and how they interact with these automotive sector and other declared tariffs. The next key date for the Federal Register posting on automobile parts is May 3, 2025, or before. First, this will identify components within engines, transmissions, powertrain parts, and electronic components. Second, it may determine how automobile parts manufacturers identify, document, report, and pay tariffs on non-U.S. material content.
