WASHINGTON — President Donald Trump signed an executive order Wednesday to levy 25% tariffs on vehicles and certain auto parts not produced in the United States, a policy that experts and industry executives warn could create distinct winners and losers in Detroit.

"This is very modest," Trump said in the Oval Office during the signing. "If they are made in the United States, there absolutely is no tariff."

But millions of vehicles sold in the United States are built in other countries, from Mexico to South Korea, and sold under brand names ranging from Chevrolet to Toyota. And no vehicle assembled in the United States exclusively uses components made within the country. That means every vehicle will be more costly once the new tariffs begin to be collected on April 3.

The tariffs, instituted under Section 232 authority on the grounds of national security, will also be on top of other tariffs already in place. They are expected to generate $100 billion in additional annual revenue, according to the White House.

“That number is going to be used to reduce debt greatly in the United States and to build things, reduce taxes,” Trump said. “Basically, what I’m doing is reducing taxes and reducing debt, and in a fairly short period of time, I think we’re going to have a balance sheet that’s going to be outstanding.”

Unless there is a free-trade agreement, cars imported usually face a 2.5% duty; imported light trucks have had a 25% "chicken tax" on them since the 1960s from a trade dispute with France and West Germany that's protected U.S. truck manufacturing for decades. But Trump also signed a 25% tariff on Canada and Mexico earlier this month, which would mean vehicles assembled in Mexico or Canada and imported into the United States could be looking at a tariff as high as 52.5% in total.

The White House on Wednesday confirmed, however, that goods compliant with the United States-Mexico-Canada trade agreement, which Trump signed in 2020, will only be tariffed on the value of their non-U.S. content. For now, though, USMCA-compliant parts will remain tariff-free until the U.S. Commerce Secretary and Customs and Border Protection establish a process to apply tariffs to their non-U.S. content.

More than 92% of vehicles imported from Canada and Mexico complied with the USMCA in 2023, according to the latest figures available from the Office of the U.S. Trade Representative.

"Armageddon" is how Daniel Ives, analyst at investment firm Wedbush Securities Inc., describes the scenario of 25% tariffs on foreign-built vehicles and their parts.

Companies may look to onshore production, but to meet safety and quality standards, that is a long and complex process that can only be completed well past when the tariffs' impact will be felt within the industry, said Glenn Stevens, executive director of MichAuto, the automotive arm for the Detroit Regional Chamber, in a statement.

"This will impact availability of products for consumers and will increase prices in the showrooms," Stevens said. "Demand will be affected across the industry and that will likely cause production cuts that will reverberate through the supply chain. This means jobs lost and increased pressure on the balance sheets of companies large and small."

Trump promised that his tariffs "continue to spur growth like you've never seen before," including in U.S. auto manufacturing. He said some car plants are already being built, mentioning Wednesday a Honda Motor Co. Ltd. facility in Indiana.

But the Japanese carmaker later contradicted Trump's assertion about the Indiana plant in a statement to The Detroit News. It said it supports Trump's commitment to manufacturing in America, and has invested more than $3 billion in that space over the last three years, and nearly $25 billion total, it "did not announce plans for a new plant in the U.S. at this time."

Of the major automakers that have announced significant U.S. investments since Trump took office and began threatening tariffs on the industry, it hasn't always been clear what the companies already had in the works.

Stellantis NV, for instance, earlier this year said it was reopening its plant in Belvidere, Illinois, and maintaining more SUV production in Detroit, investments it had previously discussed making. Hyundai Motor Co. said this week it would invest $21 billion to expand its manufacturing and install a steel factory in Louisiana. However, some of those plans had previously been put in play by the Korean automaker.

Toyota Motor Corp. and Volkswagen AG, companies that sell large numbers of imported vehicles in the United States, declined to comment on Trump's tariff announcement. BMW AG declined to comment directly on the specifics of Wednesday's announcement, but said tariffs overall are damaging. It could especially be stung by the new 25% auto tariffs thanks to two popular models it builds in Mexico, including its 3 Series sedan, which were already subject to 27.5% tariffs under one of Trump's previously announced import taxes.

"Free trade, which has always been a guiding principle for the BMW Group, is of immense importance worldwide: It is one of the most crucial drivers of growth and progress," the German automaker said. "Tariffs, on the other hand, hinder free trade, slow down innovation, and set a negative spiral in motion. In the end, they are detrimental to customers, making products more expensive and less innovative.

Winners and losers

The announcement came after days of swirling speculation about how the president would levy "reciprocal tariffs" on U.S. trading partners. The administration has repeatedly said those tariffs will take effect April 2, with Trump referring to that day as "Liberation Day" for the U.S. economy.

"This is permanent, 100%," Trump said in response to a question about the longevity of the new auto tariffs.

That makes everyone “losers,” Ives said, except for maybe Tesla Inc., because all of its production for the U.S. market is in the country. The electric vehicle maker's chairman and largest shareholder, Elon Musk, is the president's largest donor and heads his government efficiency arm dubbed DOGE.

In response to a question, Trump said Musk has not asked him for any special favors: "He's a patriot."

Also potentially better protected from the 25% foreign-built duties are the likes of Ford Motor Co., which produces roughly 80% of its vehicles sold in the United States in the country and produces more vehicles in the United States than any other automaker, according to S&P Global Inc. General Motors Co., meanwhile, produces substantially more vehicles in places like South Korea, Mexico and Canada, ranking the Detroit automaker among the largest importers of foreign-built vehicles.

GM declined to comment on the new tariffs.

Carmakers like GM could look to move final assembly of foreign-made vehicles to the United States, Ives said, but there continues to be a lack of confidence in how long these levies will remain for that to happen.

“It’ll take a long time, but our view is that what’s initially announced here could change by the end of the week,” he said. “No one knows the rules of the game.”

Meanwhile, the United Auto Workers applauded the new policy as a step toward ending "the free trade disaster that has devastated working-class communities for decades," UAW President Shawn Fain said in a statement.

“The UAW has been clear: we will work with any politician, regardless of party, who is willing to reverse decades of working-class people going backwards in the most profitable times in our nation’s history," Fain said.

He added: "These tariffs are a major step in the right direction for autoworkers and blue-collar communities across the country, and it is now on the automakers, from the Big Three to Volkswagen and beyond, to bring back good union jobs to the U.S.”

Economic implications

But any U.S. tariffs affecting motor vehicles and their supply chains could have massive implications for the nation's financial health. The auto industry drives $1.2 trillion in U.S. economic activity annually, according to the Alliance for Automotive Innovation, a trade group that represents major automakers in the United States except for Tesla. Some experts have suggested tariffs on autos could drive the country into recession.

"The president's remarks today suggest that automobile buyers, and automobile workers, are in for a shock starting in less than a month," Patrick Anderson, CEO of East Lansing's Anderson Economic Group consulting firm, said in a statement Wednesday. "Tariffs at these levels mean cost increases of $4,000 to $10,000 per car, including most 'American' cars."He added: "This is going to have a dramatic negative effect on car sales in the United States, and will cause job losses in Michigan, Ohio, Indiana, Illinois, Missouri, Texas, South Carolina and Alabama, as well as Ontario in Canada."

Stocks across the auto industry — including for Michigan automakers Ford, GM and Stellantis — were sharply down initially as word of the tariff announcement spread. At the close of the day's trading, GM and Stellantis shares had lost more than 3% each, while Ford had recovered to post a slight gain. The sell-off continued in after-hours trading, which is often more volatile than regular trading hours.

The entire industry will likely face severe consequences, from higher vehicle prices to supply chain breakdowns, if the tariffs last for a prolonged time.

"At a time when cost is the number one concern for America car buyers," Jennifer Safavian, CEO of Autos Drive America that represents foreign automakers manufacturing in the United States, said in a statement, "the tariffs imposed today will make it more expensive to produce and sell cars in the United States, ultimately leading to higher prices, fewer options for consumers and few manufacturing jobs in the U.S."

Industry leaders have expressed serious concerns — including in meetings with Trump — that tariffs on autos without exemptions for goods that comply with the USMCA trade agreement would disproportionately harm automakers' U.S. operations.

Ford Executive Chairman Bill Ford on Wednesday flew to Washington, according to two sources familiar with the information who were not permitted to speak publicly on the topic. Ford spoke with White House policy advisers about tariffs, according to one of the sources, but not the president himself.

Parts often cross between the three North American countries several times in the vehicle manufacturing process, even when cars or trucks are assembled and completed in the United States. Earlier this month, Trump levied 25% blanket tariffs on the U.S. neighbors before granting an exemption for USMCA goods, in part thanks to lobbying from executives of the Detroit Three.

Ford CEO Jim Farley had warned the tariffs on Canada and Mexico would "blow a hole" in the industry. He, along with Stellantis Chairman John Elkann, had questioned why those two nations were singled out, when the United States imports 3.7 million vehicles that weren't affected by tariffs on Canada, Mexico or China and often don't have U.S. parts content.

For 2025 models, there are 176 listed with 0% U.S. and Canadian content, according to a report required by the American Automobile Labeling Act.

Japan, South Korea and Germany round out the top five in exports of finished vehicles to the United States. Neither of the Asian countries applies tariffs to U.S. vehicles, while Germany and the rest of the European Union have 10% tariffs for U.S. autos.

In February, the president directed a sweeping investigation into what his administration calls "non-reciprocal trading arrangements." Those arrangements include tariffs that make U.S. goods more expensive abroad and non-tariff elements, like taxes, that make all goods more expensive.

Japan — despite having no tariffs — imports relatively few U.S.-made vehicles or parts, according to the nonpartisan Congressional Research Service.

"Japan argues that this reflects U.S. producers’ failure to cater to Japanese tastes," the group said in a 2024 report. "U.S. industry argues low exports stem from nontariff barriers, including discriminatory regulatory treatment."

South Korea, which has a free trade agreement with the United States, imported about $2 billion worth of U.S. automotive goods last year compared to more than $50 billion in exports.

GM has an extensive manufacturing footprint in the country. It produced more than 400,000 units in South Korea last year under the Chevrolet and Buick nameplates for eventual sale in the United States.

As for Europe, Trump has repeatedly threatened tariffs on the bloc. "We have a problem with the European Union," Trump told reporters on March 12. "They don't take our farm products. They don't take our cars. We take millions of cars, BMWs and Mercedes-Benz and Volkswagens and everything. We take millions of cars."

China also faces high obstacles in importing vehicles into the United States. Trump has already instituted a total of 20% more duties on goods from the nation. The Biden administration had raised tariffs on electric vehicles from China to 100%.

Some praise the move

Trump has long suggested that tariffs could be a tool to return more automotive manufacturing jobs to the United States.

"I think that the administration has a point in saying that tariffs don't always have the kind of economy impacts that economists say they do," Greta Peisch, the former general counsel for the Office of the U.S. Trade Representative under President Joe Biden, said in a Wednesday phone interview.

She added: "This is the real world, and you sometimes have to see how things play out."

Alliance for American Manufacturing President Scott Paul said in a post on social media platform X that the tariffs are "necessary" in light of eroding domestic manufacturing from increased Asian imports and the North American Free Trade Agreement that took effect under President Bill Clinton in 1994.

Executives in the auto industry for weeks have discussed making preparations in the event of more tariffs, and some companies have suggested U.S. manufacturing could increase as a result of them.

“I actually think there's some opportunities,” Lear Corp. CEO Ray Scott said last week about increasing the Southfield-based seating and electrical components supplier's modular assembly production in the United States because of the duties.

“With the modular solution we have, we could move that and scale that in a proper way in the United States," he said during the Wolfe Research Virtual Autos Summit. "So those types of discussions are being brought up where we can actually do assembly in the U.S. and certain key components.”

The automotive tariff announcement comes amid a moment of heavy scrutiny for the Trump administration over its accidental disclosure of military planning information to a journalist and its communication outside proper channels.

The scandal has been widely referred to as Signalgate, a reference to the encrypted messaging app Signal and former President Richard Nixon's Watergate scandal.

Regarding tariffs, Trump said: "Our automobile business will flourish like it's never flourished before."

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