No fooling: Trump sets April 2 as date for 25% auto tariff

“The European Union was formed in order to screw the United States,” Donald Trump said this week. “That’s the purpose of it. They have done a good job of it, but now I am president.”

Sound harsh? Consider the numbers. The U.S. already currently imposes a tariff of 2.5% on cars imported from Europe. Europe, meanwhile, imposes a 10% import tariff on cars imported from the U.S.

A 25% tariff would add some $60 billion to the coffers. But it also means that overall car prices could go up by $60 billion.

In other words, the European tariff is four times higher. The U.S. also has a 25% tariff on pickup trucks, but Europe really doesn’t make pickups.

Nonetheless, these words provoked the usual pearl-clutching from the usual subjects. But most Americans are more focused on what Trump intends to do about this: the 25% tariff he's slapping on all imported cars.

A widening target

While Trump has been threatening to put higher tariffs on cars from Canada and Mexico, he’s now also going to be targeting imports from Europe, Japan, and South Korea as well.

What's more, these tariffs now have a start date: April 2.

Volkswagen, Hyundai-Kia, Mercedes, Nissan, and BMW have the highest percentage of imported vehicles, so they’d be impacted the most, but it would hit all automakers hard. Imports account for nearly half of all the vehicles sold in the U.S., with most of them coming from Mexico, South Korea, and Japan.

According to data from Global Data, automakers such as Volkswagen and Hyundai-Kia rely heavily on overseas production, with 80% and 65% of their U.S. sales coming from imports, respectively.

North American impact

The potential impact on vehicles manufactured under the U.S.-Mexico-Canada Agreement remains uncertain. North America’s auto industry is built on deeply interconnected supply chains, and any disruption could result in higher costs for manufacturers and consumers. Tariffs on auto imports could lead to price increases, affect production timelines, and complicate long-standing trade relationships between the three nations.

The U.S. imports $240 billion worth of vehicles every year. A 25% tariff would add some $60 billion to the coffers. But it also means that overall car prices could go up by $60 billion.

And make no mistake about it: The domestic manufacturers would raise their prices to pretty much match that.

Those tricky VATs

However, here’s where it gets tricky. Europe also imposes a value added tax on all products sold in Europe, but not if those products are exported. It’s really a tax policy designed to boost exports and hurt imports. Japan and South Korea use a value added tax as well.

President Trump says he’s going to include those VATs to figure out how high the tariffs should be on cars that come from those countries. Germany has a 19% VAT, in South Korea it’s 10%, and in Japan it’s 20%. Trump says he’ll lower his tariffs if other countries cut theirs and remove trade barriers. So one thing’s for sure: This story is far from over.

Trump has also promised tariffs on imported goods in general, including a 25% tariff on steel and aluminum to take effect on March 12. This rhetoric has ratcheted up fears of a widening global trade war and accelerating U.S. inflation.

While the president did not provide details on the scope or rates of the potential tariffs, the move aligns with his broader trade strategy to encourage domestic production and reshape global trade relations.