President Donald Trump has announced a new 25% import tariff on automobiles and auto parts entering the United States, set to take effect on April 2. The new taxes will apply to businesses importing vehicles starting the following day, with tariffs on car parts expected to begin in May or later.

The president claimed that the tariffs would lead to “tremendous growth” within the U.S. auto industry, promising job creation and increased investment in the country. However, analysts have warned that this move could result in the temporary closure of major U.S. car production facilities, higher prices for consumers, and increased tension with international trade partners.

This new tariff strategy poses a significant challenge to global automotive trade and supply chains. In 2024, the U.S. imported approximately eight million cars, which represented around $240 billion in trade, or roughly half of total vehicle sales in the country. Mexico is the leading supplier of cars to the U.S., followed by South Korea, Japan, Canada, and Germany.

Many U.S. automakers have operations in both Mexico and Canada, established under the long-standing trade agreements between these nations. Notably, auto parts imported from Canada and Mexico will initially be exempt from the new tariffs while U.S. Customs and Border Protection sets up a system to implement the duties. These neighboring countries engage in significant daily cross-border trade, valued in the billions.

Following the announcement, shares of General Motors dropped approximately 3%, while Stellantis (the parent company of Jeep and Chrysler) saw a 3.6% decline. Tesla CEO Elon Musk also addressed the tariffs on social media, noting that the new measures would have a significant impact on his company’s operations.