Trump’s Auto Tariffs Could Dramatically Hit U.S. Car Demand, Analysts Warn

President Donald Trump’s newly announced tariffs on vehicle imports could deliver a major blow to U.S. car sales, according to fresh analysis from Bank of America (BofA).

In a note to clients, BofA strategists cautioned that the tariffs may “significantly impact” demand for cars across the United States, given that a large proportion of vehicles sold domestically are imported.

Imported Vehicles Make Up Half of U.S. Auto Sales

Currently, the U.S. sells around 16 million light vehicles annually, with imported models accounting for up to 50% of that total. According to data from BofA, approximately 3.6 million cars entered the U.S. from Mexico and Canada in 2024, while additional imports included 900,000 units from Europe, 1.3 million from Japan, and 1.4 million from South Korea.

Trump confirmed that the new tariffs will take effect from 3 April, fulfilling a long-standing commitment to impose levies on foreign-made cars and trucks. Speaking from the Oval Office, he clarified the duties would apply to “all cars not made in the U.S.”

NAFTA Nations Not Exempt From New Duties

Despite longstanding free trade agreements with Mexico and Canada—signed during Trump’s first presidential term—the president did not signal any clear exemptions for those countries. This has raised concerns given their integral role in North American auto manufacturing.

Trump defended the move by claiming the tariffs would help recover revenue lost from proposed tax cuts and incentivise a revival of domestic manufacturing jobs. However, global leaders, including those from Canada and the European Union, were quick to criticise the policy shift.

U.S. Automakers Face Market Turbulence

Shares of American automakers such as Ford, General Motors, and Stellantis (parent company of Jeep) fell following Trump’s announcement, reflecting market unease. However, analysts at Bernstein Research noted that U.S.-based carmakers might be less affected than their overseas counterparts.

Brands that do not manufacture vehicles within the U.S.—such as Mitsubishi and Jaguar Land Rover—are expected to bear the brunt of the new levies. These manufacturers could face "prohibitive tariffs" that sharply reduce profitability within the American market, the analysts warned.

Tariff Costs Could Add Over $6,000 Per Car

According to Bernstein estimates, the total cost of the tariffs could hit $100 billion, equating to roughly 14% of the auto industry’s annual revenue. Broken down across the 16 million vehicles sold annually, that means each car could become around $6,250 more expensive for U.S. consumers.

While Trump hinted at a new tax deduction for auto loan interest, Bank of America’s Stephanie Vincent clarified that this measure would only apply to vehicles produced in the U.S.—further disadvantaging foreign manufacturers.

(Sources: investing.com, reuters.com, ChatGPT)