White House Announces 25% Tariff on Automobiles and Certain Automobile Parts

On March 26, 2025, President Donald Trump signed a proclamation imposing a 25% tariff on imports of automobiles (including passenger vehicles, i.e., sedans, SUVs, crossovers, minivans, cargo vans, and light trucks) and certain automobile parts (engines, transmissions, powertrain parts, and electrical components, with processes to expand to additional parts, if necessary) pursuant to authority granted by Section 232 of the Trade Expansion Act of 1962. The tariff on automobiles will be effective on April 3, 2025, and the effective date of the tariff on automobile parts will be published in the Federal Register, but no later than May 3, 2025.

Background

The proclamation references and builds on the 2019 Section 232 report that President Trump concurred with in Proclamation 9888 (dated May 17, 2019). Specifically, that report stated that “automobiles and certain automobile parts are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States.” As a result, President Trump directed the United States Trade Representative (“USTR”) to pursue negotiation of agreements with the European Union, Japan, and other countries. Further, the President directed the Secretary of Commerce to “monitor imports…and inform [the President] of any circumstances that…indicate the need for further action under section 232.”

Post-2019 Developments

According to the 2025 proclamation, the national security concerns articulated in the 2019 Section 232 report “remain and have escalated.” These concerns include supply chain challenges, material and part shortages, and labor issues. The 2025 proclamation also claims that foreign auto industries benefit from “unfair subsidies and aggressive industrial policies” and estimates that roughly half of vehicles sold in the United States are domestically manufactured. Finally, President Trump states that revisions to key trade agreements (the US-Korea Free Trade Agreement and the US-Mexico-Canada Agreement (“USMCA”)) have not “yielded sufficient positive outcomes,” and negotiations by the USTR did not lead to any agreements.    

Tariff Details

• For qualifying automobiles imported under the USMCA (i.e., qualifying as having sufficient content from the United States, Mexico, and Canada), importers can identify the amount of “US content” in imported automobiles and, if approved by the Secretary of Commerce, the 25% tariff will only apply to the value of the non-US content of the imported vehicle.
• Notably, the proclamation does not address commitments the United States made as part of the USMCA negotiations that impose certain requirements on the United States in the event of any 232 measures on imported automobiles and automobile parts. Specifically, side letters (dated November 30, 2018) to Mexico and Canada commit the United States to an implementation date for any restrictions on imports from Canada or Mexico that is 60 days later than the initial imposition of restrictions. At the end of the 60-day period, with regard to Mexico, the United States must exclude from the measure: (1) 2,600,000 passenger vehicles on an annual basis; (2) light trucks; and (3) US$108 billion of auto parts annually. With regard to Canada the United States had agreed to exclude from the measure: (1) 2,600,000 passenger vehicles on an annual basis; (2) light trucks; and (3) US$32.4 billion of auto parts annually.
• If US Customs and Border Protection (“CBP”) determines that importers overstate the US content of imported automobiles eligible for the reduction discussed above, the 25% tariff will apply to the full value of the automobile, as well as retroactive application to same model automobiles imported by the same importer, retroactively enforced on imports between April 3, 2025 to the overstatement, and prospectively between the overstatement and overstatement correction.
• The tariff does not apply to qualifying automobile parts imported under the USMCA until the Secretary of Commerce and CBP establish a process to apply the tariff exclusively to non-US content of the parts. This exclusion does not apply to “knock-down kits” or parts compilations.
• Within 90 days, the Secretary of Commerce (in consultation with the US International Trade Commission and CBP) shall establish and promulgate a process to add more parts to the list subject to the 25% tariff. This process shall provide an opportunity for domestic producers or industry associations to request that additional types of parts be subject to the 25% tariff.
• Drawback is not available for paid tariffs.

Interested parties should carefully review tariff details (especially the areas eligible for future expansion) to determine impacts prior to the implementation date on April 3.