President Donald Trump said Wednesday that he was placing 25% tariffs on auto imports, according to the Associated Press, a move the White House claims will foster domestic manufacturing but could also put a financial squeeze on automakers that depend on global supply chains.
Trump has long said that tariffs against auto imports would be a defining policy of his presidency, betting that the costs created by the taxes would cause more production to relocate to the United States while helping narrow the budget deficit. However, U.S. and foreign automakers have plants around the world to accommodate global sales while maintaining competitive prices — and it could take years for companies to design, build and open the new factories that Trump is promising.
According to experts, more households are likely to be priced out of the new car market — where prices already average about $49,000 — and will have to hang on to aging vehicles.
The tariffs on autos would start being collected on April 3, Trump said. If the taxes are fully passed onto consumers, the average auto price on an imported vehicle could jump by $12,500, a sum that could feed into overall inflation.
As Trump announced the new tariffs, he indicated that he would like to provide a new incentive to help car buyers by allowing them to deduct from their federal income taxes the interest paid on auto loans, so long as their vehicles were made in America. That deduction would eat into some of the revenues that could be generated by the tariffs.
