Car industry: 25 percent duty on US car imports by presidential decree

Contents

In order to "address a significant threat to US national security", US President Donald Trump issued a presidential decree on Wednesday imposing a 25 percent tariff on imports of cars and certain car parts. He is referring to Section 232 of the Trade Expansion Act of 1962 and is convinced that this is necessary to protect the American automotive industry. He justifies this step by stating that the US automotive industry is "vital to national security", but that "excessive imports threaten the domestic industrial base and supply chains".

The 25 percent tariff will be applied to imported passenger cars (sedans, SUVs, minivans, vans) and light trucks, as well as major automotive parts (engines, transmissions, powertrain parts and electrical components). If necessary, this levy is to be extended to additional parts. Although it was initially reported that the duties would be levied from April 2, the White House has now announced that they will not be collected until April 3. The export countries most affected are Mexico, Japan, South Korea, Canada and Germany.

Exemptions for Mexico and Canada

Importers of cars under the agreement between the United States and Mexico and Canada are allowed to pay the duty on the portion of their imports that does not originate from the USA. The car parts exempted from the USMCA will initially remain duty-free and will be checked by border officials. USMCA is the name of the North American Free Trade Agreement signed by the USA, Mexico and Canada during Trump's first term in office.

The German automotive industry is expecting a considerable burden because the USA is its largest sales market. According to surveys by the Federal Statistical Office, Germany was the largest exporter to the USA in 2024 with 13.1 percent, followed by the UK with 11.3 and France with 7.4 percent. In order to avoid tariffs, German manufacturers have long been producing high-demand models in the USA, following the example of the major Japanese brands.

"Unfair treatment"

With the tariff increase, the US President wants to solve the problem of what he sees as unfair treatment of American car exports on foreign markets. The European Union levies a tariff of 10 percent on vehicle imports, while exports to the USA were previously subject to a tariff of 2.5 percent. The US President also justified the asymmetrical increase with the value added tax that is levied in Europe.

The new duty rate of 25 percent follows the so-called "chicken tax", which has been levied on poultry, other agricultural products and commercial vehicles not built in the country since 1964. This duty has applied to pick-up trucks for decades, unless they are imported into the USA from Mexico and Canada, and has made this vehicle class particularly profitable for US manufacturers ever since.

Measures from times before modern agreements

The US government is thus reaching far back into a time when many of the trade agreements that now regulate the movement of goods for the mutual benefit of the nations involved had not yet been concluded. Effective March 12, 2025, the President had already imposed additional tariffs of 25 percent on steel and aluminum, also citing Section 232 of the Trade Expansion Act of 1962.

Tariffs are considered risky because they increase consumer prices. This reduces purchasing power and consumption. The announcement of tariffs alone led to a fall in the price of major US equities and a revision of the current growth forecast by the US Federal Reserve.

Further new tariffs on imports have already been announced, and the US President intends to announce an entire tariff package on April 2. He is already talking about a "day of liberation" for his country. The EU Commission fears levies on medicines and foodstuffs, among other things. The trade war seems inevitable: EU Commissioner Maros Sefcovic has already held talks with the US government in advance, but without being able to reach an agreement. The EU is now hoping that its counter-tariffs, which have already been finalized, will lead to pressure to negotiate from mid-April.

(fpi)