President Trump on Wednesday unveiled a new 25% tariff on all cars and light trucks that are not manufactured within the United States marking one of the most aggressive moves yet in his trade agenda and one that could have sweeping consequences for the American economy and consumers.
The announcement, made from the Oval Office, is aimed at pressuring foreign automakers to move production to U.S. soil. “We’ll effectively be charging a 25% tariff, but if you build your car in the United States, there is no tariff,” Trump told reporters. “That means a lot of foreign car companies are going to be in great shape because they’ve already built their plant, but their plants are underutilized, so they’ll be able to expand them inexpensively and quickly.”
While the administration is framing the move as a boost for American jobs and domestic manufacturing, economists and auto industry experts warn it could have the opposite effect—slamming American consumers with higher car prices and disrupting a supply chain already grappling with inflation, labor shortages, and supply issues.
The auto industry has long been viewed as one of the sectors most vulnerable to trade disruptions, and this latest action has only intensified those concerns. Trump’s fluctuating tariff threats on Canada and Mexico have already raised production costs for U.S. automakers, and his previous tariffs on steel and aluminum further increased prices on raw materials used in cars. This latest policy adds yet another layer of uncertainty in an industry undergoing a historic transition to electric vehicles and contending with fierce competition from China.
About 45% of light vehicles sold in the U.S. are imported, according to S&P Global Mobility. That means nearly half the cars Americans buy could be directly impacted by this new tariff, leading to price hikes that will hit the middle class hardest.
In a study conducted earlier this year, the U.S. International Trade Commission examined the possible effects of broad auto tariffs. The findings were stark: a 25% tariff on all U.S. auto imports would cut import volume by 74% and increase the average price of vehicles by 5%. For many Americans already struggling with high interest rates and rising costs of living, this could mean paying thousands more for a new car—or being priced out of the market entirely.
The broader economic ripple effects could be just as damaging. Tariffs risk prompting retaliatory measures from key trading partners, sparking trade disputes that could hurt U.S. exports and further strain global alliances. Additionally, many foreign automakers operate U.S.-based plants that depend on imported parts; these tariffs could also hurt those operations, potentially leading to job losses—the very thing the policy aims to prevent.
Critics are already blasting the move as politically motivated and economically reckless. Consumer advocacy groups warn that working families will bear the brunt, while labor unions fear the policy may backfire if foreign firms shift focus to other markets or reduce their U.S. footprint altogether.
In trying to force automakers to “Buy American,” Trump may have just handed American consumers the bill one they can’t afford to pay.