The US Introduces Tariffs on Vehicle Imports

No exceptions. Trump has imposed high tariffs on car imports.

At a press conference on Wednesday shortly after 10 p.m., US President Donald Trump announced 25% tariffs on all cars not manufactured in the US. “If they are made in the United States, there will be absolutely no tariffs,” Trump said.

These tariffs on all new passenger cars and light trucks manufactured abroad (outside the US) will be added to the duties already in force. The US currently applies a 2.5 percent duty on car imports, but it levies a 25 percent duty on pickups from countries such as Mexico and Canada. The European Union applies a 10 percent duty on vehicle imports, four times the current 2.5 percent US duty on car imports.

The tariffs will take effect on 2 April. Collection is to begin on 3 April; specifically, cars will be subject to the 25% duty from 5:00 a.m. CET on 3 April.

The US government expects the measure to bring in an additional USD 100 billion. Trump is betting that the costs resulting from these tariffs will cause more production to move to the United States. This will support domestic production but will also place a financial burden on manufacturers that depend on global supply chains. The tariff could raise car prices by thousands of dollars, which would hit new vehicle sales and lead to job losses. US and foreign carmakers with plants in the US still rely on Canada, Mexico and other countries for parts and finished vehicles, which means that car prices could rise and sales could fall, since building new factories takes time.

Some of the tariffs that Trump recently planned to impose on Mexico and Canada, including duties on cars, were suspended after carmakers raised objections, and Trump responded by granting them a 30-day reprieve that ends in April.

About 50 percent of cars sold in the US are made in domestic plants. Americans bought about 16 million cars last year, half of which were imported. Roughly half of these imports come from Mexico and Canada and the other half from other major car-producing countries. In 2024, the US imported automotive products worth USD 474 billion, including passenger cars worth USD 220 billion. The largest suppliers were close US allies such as Mexico, Japan, South Korea, Canada and Germany. The US share of global car production has stagnated, and employment in the US automotive industry has not increased.

The European Union will respond to the introduction of US import tariffs on cars. This was announced on Wednesday evening by European Commission President Ursula von der Leyen in response to US President Donald Trump’s announcement of 25% tariffs on imports of all cars not manufactured in the United States, the TASR correspondent reports.

“The automotive industry is a driver of innovation, competitiveness and high-quality jobs through deeply integrated supply chains on both sides of the Atlantic,” von der Leyen explained.

She reiterated that tariffs are in fact taxes, which are bad for businesses and even worse for consumers, both in the United States and in the European Union.

“We will now assess this announcement, together with other measures that the United States is planning to take in the coming days. The EU will continue to seek negotiated solutions while safeguarding its economic interests,” the Commission President said.

At the end of her statement, she added that the EU, as a major trading power and a strong community of 27 Member States, will jointly protect its workers, businesses and consumers throughout the European Union.

German Economy Minister Robert Habeck also reacted to the US President’s move, saying that US tariffs on imported cars require a firm response from the European Union. “What matters now is a tough EU response to these tariffs. It must be clear that we will not simply accept this,” he said, adding that the EU must seek a solution through negotiations.

During Donald Trump’s first administration, the EU imposed retaliatory tariffs on American whiskey and Harley-Davidson motorcycles in response to tariffs on European steel. This time, however, it has an even more powerful tool up its sleeve: the so-called Anti-Coercion Instrument (ACI). This legislative framework allows the EU not only to impose reciprocal tariffs, but also to ban foreign direct investment, restrict the business activities of US companies in Europe or even impose restrictions in the field of intellectual property.

At the same time, however, Trump threatened that if the EU and Canada attempt to harm the US economy in a coordinated way, he will impose even tougher and more extensive tariffs.

In addition to the automotive industry, Trump is also planning extensive tariffs on sectors such as pharmaceuticals and semiconductors.

As regards the impact of the US measures on Slovakia, approximately 600 Slovak companies export their products to the US. The automotive industry dominates, with passenger cars and their parts accounting for more than 75 percent of exports to the US.

In Slovakia, the tariffs will probably have the greatest impact on the Volkswagen plant in Bratislava, which exports models such as the Porsche Cayenne and the Audi Q7 and Q8 to the US. North America accounts for as much as 25 percent of the plant’s revenue, and the introduction of tariffs could significantly hit this part of its income.

The new US tariffs are initially to apply to finished cars, but not to car parts. Car parts are subsequently also to become subject to duty, but collection is to be postponed: according to the proclamation signed by Trump, they will be subject to tariffs from a date to be published in the Federal Register, “but no later than 3 May”.

The specific details of the presidential decree are not yet clear, as most cars are assembled from thousands of parts that may come from dozens of different countries.

In connection with the introduction of 25% tariffs on all cars not manufactured in the US, the question arises of timely and effective measures to be taken by EU exporters of these goods to the US, i.e. measures to mitigate the negative impacts and adapt to the new conditions.

Exporters will seek the following solutions (apart from cost-cutting and better marketing to offset price differences, which are always available):

Production in the target market (localising production in the US): If logistics and costs permit, the possibility of relocating production or assembly to the country that introduced the tariff, i.e. the US, should be explored. Cars assembled or manufactured directly in the US could then be regarded as “domestic production” and the tariff should not apply to them. However, this requires investment in infrastructure and workforce, as well as compliance with local legislation.

Use of a processing customs procedure: One option is to examine US customs legislation to determine whether there are provisions allowing certain parts to be exported from the US and imported into the EU for the manufacture (finishing) of cars (also using other components), followed by the import of the cars into the US, with the duty calculated not on the value of the car but on the value of the processing operation (i.e. an equivalent of outward processing under EU customs legislation).

Increasing local value added in the US: Investment in local value added in the country may be considered, for example assembling vehicles from parts not subject to duty, or adding components so that the product reaches a certain percentage of local production (“local content”), which could result in a reduced duty or an exemption.

Market diversification (considering a shift to new markets): Exploring new markets that do not have these trade barriers (where no tariff is imposed or it applies to a lesser extent) may also be considered. However, this requires an analysis of new business opportunities and can be time-consuming.

Each of these approaches has its advantages and disadvantages, depending on the size of the company, the nature of the products, and the logistics and supply chain options. It is also important for exporters to consult experts in trade law, customs regulations and global supply chains in order to find the most effective solution for their specific situation.