Key Details on the New U.S. Tariffs: What to Expect
1. Automotive Tariff of 25% on All Imports
- Went into effect on April 3, 2025
- Rate: 25% on passenger vehicles and light trucks, as well as key automotive parts (engines, transmissions, powertrain parts and electrical components).
- Applies at Every Stage: The tariff can be charged each time a component enters the USA. That means raw materials, modules, and fully assembled vehicles can be subject to the tax as they move through production. At this time USMCA-compliant components are tariff free from Canada and Mexico.
- The key automotive parts apply to commercial vehicles such as medium & heavy-duty models (class 4 – 8).
- To be determined how key automotive parts will be covered by the US, Mexico, Canada (USMCA), which would prevent tariffs from applying to certain parts. USMCA replaced NAFTA.
2. Impact of Tariffs on United States-Mexico-Canada Agreement (USMCA)
- Went into effect on April 29, 2025
- Automotive tariffs (#1 above) do not apply if the vehicle has final assembly in the USA and 85% of the content is USMCA compliant.
- Automotive tariffs (#1 above) would apply if the vehicle has final assembly in the USA and less than 85% of the content is USMCA compliant.
- As an example, if the vehicle has 50% of the content that is USMCA compliant, then the 25% tariffs would apply to difference of 35% (85%-50%) of non-USMCA compliant content.
- Automotive manufacturers can also submit supporting documents to obtain a tariff offset in 2025 & 2026
- In 2025, manufacturers can obtain up to 15% of imported component tariffs back.
- In 2026, manufacturers can obtain up to 10% of imported component tariffs back.
- In 2027, manfacturers cannot obtain any monies from imported component tariffs back.
3. How This Impacts Vehicle Costs
- USA-Assembled Vehicles (using imported parts) Added Cost: Estimated at $3,000+ per vehicle.
- Imported-Assembled Vehicles (regardless of country) Added Cost: Estimated at up to $10,000+ per vehicle.
4. Tariff of 50% on Imported Steel and Aluminum
- Went into effect on June 4, 2025 with an incremental 407 Harmonized Tariff Schedule (HTS) codes added on August 18, 2025.
- Raw Materials: As an example, bar stock of steel and aluminum
- Finished Goods: As an example, engine blocks, cylinder heads, complete engine assemblies
- Rate: 50% on imported steel and aluminum from any country. The prior exception so that imported steel and aluminum tariffs were not stackable with automotive (Section 232) tariffs was removed on August 18, 2025 when an incremental 407 HTS codes were added by the USA Bureau of Industry and Security.
- Rate: 25% on imported steel and aluminum from China, stackable on other tariffs in effect (i.e. automotive, etc.). Automotive components would therefore be 50%.
5. Tariff of 50% on Imported Copper
- Went into effect on August 1, 2025
- Raw Materials: As an example, ore and scrap, are excluded from this tariff.
- Semi-Finished Goods: As an example, pipes, wires, and sheets, as well as pipe fittings and cables are included.
- Rate: 50% on imported copper. But there is an exception so that imported copper are not stackable with automotive (Section 232) tariffs.
6. Tariffs by Country
- Canada at 35% tariff on vehicles and components effective July 31, 2025. Most vehicles with final assembly in Canada are USMCA compliant, therefore the tariffs are not applicable. Additionally, components that are USMCA compliant are not impacted by tariffs.
- Mexico at 25% tariff on vehicles and components is extended to October 29, 2025. Most vehicles with final assembly in Mexico are USMCA compliant, therefore the tariffs are not applicable. Additionally, components that are USMCA compliant are not impacted by tariffs.
- Japan at 15% tariff on vehicles and components effective July 22, 2025.
- South Korea at 15% tariff on vehicles and components effective July 31, 2025.
- European Union at 15% tariff on vehicles and components effective July 27, 2025.
- United Kingdom at 10% tariff on vehicles for the first 100,000 imports, then increasing to 25% tariff after that. Components receive a 10% tariff.
- China at 30% tariff on vehicles and components.
7. What This Means for the Market
Automakers are working on pricing models to determine how much of the increased costs will be passed on to consumers.
Tariffs can change without notice, creating uncertainty for production and pricing strategies.
Immediate effects may include:
- Reduced production and availability
- Fewer manufacturer incentives
- Higher prices on pre-tariff inventory as demand shifts
Final Thoughts
These new tariffs will have wide-reaching effects on the cost of vehicles and the broader supply chain. Consumers, dealers, and automakers should prepare for higher prices, potential inventory shortages, and evolving manufacturer strategies in response to the increased costs.
For Model Year 2026, most manufacturers are offering price protection from the time an order is placed. Furthermore, all factory orders can be scheduled. This means that if you place orders for 20 vehicles at one-time, you (1) avoid increases due to tariffs (2) can schedule production as desired such as 5 vehicles/month for 4 months.
