U.S. President Donald Trump holds notes about Tesla cars while being shown various models parked in front of the White House in Washington, D.C., U.S., March 11, 2025.
Trump said worldwide automobile taxes, er, tariffs, will come into effect next week, on April 3, alongside Trump’s so-called reciprocal tariffs, due April 2.
The new 25 percent tariff will be applied to auto parts, as well.
All other countries already face a 2.5 percent tariff on their passenger car exports to the United States and a 25 percent tariff on light trucks. Trump says his new duties will be in addition to those, raising the tariff rate for passenger cars to 27.5 percent and the rate for light trucks to 50 percent.
Cars imported from Canada and Mexico will be taxed based on the amount of non-U.S. content in the vehicle. So, if a car made in Mexico contains 50 percent American content and 50 percent foreign, the 25 percent tariff rate would be cut in half to 12.5 percent.
A 25 percent tariff could increase the average price of a car purchased in the United States by between $3,000 and $10,000.
Hard to remember that Congress decides on tariffs, not the president. But as with so much else, Trump is just fine with America’s attention-deficit disorder and the supine Republicans in control of Congress.
In reality, slapping taxes on car parts imported from Canada and Mexico will hurt U.S. automakers harder than their competitors offshore because U.S. automakers have extensive operations in Canada and Mexico.
U.S. auto dealers have warned the Trump regime that tariffs will make cars less affordable to American consumers at a time when many Americans remain concerned about inflation.
Trump has waved away such concerns, insisting his tariffs will raise revenue — enabling him to lower taxes. The White House calculates that his tariffs could raise $100 billion annually. But the mere threat of such tariffs has erased more than $100 billion from the largest carmakers’ market capitalization in recent weeks.
Plus, as I’ve shown, his tariffs are a regressive tax that will be paid mostly by lower-income Americans, while his planned tax cuts will mostly benefit higher-income Americans.
The result: a huge hidden upward redistribution.
The Trump regime also believes its car taxes-tariffs will bring automobile manufacturing back to America. Over the long term, maybe.
But the costs will be gargantuan. And because manufacturing increasingly will be done by AI-driven machines in any event, it’s hard to make the case that there’ll be more auto jobs here.
In economic terms, Trump’s tariffs — on cars and other goods — are analogous to the Signal group chat: a dumb move that’s not just a gross mistake but also indicative of a deeper failure to understand even the basics.
NOW READ: Maybe this is why they're lying
Robert Reich is a professor of public policy at Berkeley and former secretary of labor. His writings can be found at https://robertreich.substack.com/.
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