The Trump administration's 25% tariffs on imported auto parts, which goes into effect Saturday, is likely to raise prices for new and used cars, as well as for insurance and repairs for them, as even cars made in the United States have components that are made in other countries, a new report indicates.
President Donald Trump ordered the tariffs in March, and they are coming into play after his 25% tariffs on imported cars, which went live in April, reports The New York Times.
The administration said this week that the tariffs will "protect national security" through reducing Americans' reliance on foreign-made automobiles and their party and by incentivizing domestic automobile production.
The parts tariffs don't apply to equipment made in Canada and Mexico, so long as they comply with the requirements of the North American trade agreement that was negotiated during Trump's first term in office. Part of the stipulation is that a minimum amount of the content of the parts must come from North American sources.
The tariff on imported auto parts is not being subjected to other levies, and companies making cars in the United States were granted a two-year exemption from having to pay part of the tariffs on imported parts.
Even though the parts tariffs didn't start until Saturday, some automakers are already feeling the pinch.
"A lot of parts, like fasteners, washers, carpet, wiring looms, are just not available," Ford Motor Company CEO Jim Farley told CNN. "We can’t even buy those parts here."
Trump has changed his mind frequently on tariffs, just this past week modifying rules for domestic automakers to keep them from being required to pay duties on a percentage of imported components in the next two years.
Some companies will also get a break on rising prices because of Trump's exemptions for Mexico and Canada.
Canada is already preparing for the tariffs, though, with General Motors announcing its plans to eliminate a third shift at its pickup truck assembly line in Oshawa, Ontario.
The company plans to focus sales of the Ontario trucks in Canada to avoid the U.S. tariffs. Still, the reduction is expected to eliminate about 700 union jobs, with parts makers to lay off 1,200 more.
Newly elected Prime Minister Mark Carney said the decision is a "terrible manifestation" of the crisis the tariffs have brought to his nation.
Some carmakers are expected to be hit harder than others, with Tesla and Ford being less vulnerable.
Tesla makes all of the cars it sells in the United States in Texas and California, and Ford makes 80% of what it sells in the country domestically.
But General Motors uses imported parts that account for more than half the value of Cadillacs or Chevrolets that are made in the United States. It also imports cars from South Korea, Mexico, and Canada.
Car prices aren't expected to climb immediately as most makers and dealers still have large inventories of cars that were already made. Still, GM said Thursday the tariffs will cost it up to $5 billion this year, and companies such as Stellantis and Mercedes-Benz said the changing rules on tariffs mean they can't make predictions on sales and profits for 2025.
Sandy Fitzgerald ✉
Sandy Fitzgerald has more than three decades in journalism and serves as a general assignment writer for Newsmax covering news, media, and politics.
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