Details of the plan, designed to disrupt the auto trade and supply chain, are still being released on Wednesday. So far, this is well known.
All non-US assembled vehicles have a 25% responsibility
Trump will begin 25% tariffs on imports of completed vehicles starting April 3 at 12:01 a.m. GMT (0401 GMT).
These responsibilities will apply to cars and trucks built with countries with free trade agreements including Canada, Mexico and South Korea. They will suffer a hard hit, with Japanese and EU automakers Germany and Italy and the UK also going to suffer a hard hit.
Trade and automotive experts say unilateral tariffs will violate the US-Mexico-Canada Trade Agreement and the US-South Korea Free Trade Agreement (KORUS).
25% delayed parts tariff
The 25% tariff will also apply to major auto parts imports, identified in Trump’s manifesto as “engine and engine parts, transmission and powertrain parts, and electrical components.” But parts tariffs may begin in a month and set a date in the upcoming federal registration notice, but no later than May 3. The notice will also include specific tariff codes for parts that comply with taxes, which Trump’s announcement has not been revealed.
Partial USMCA exemption
The program provides partial exemptions for vehicles and parts compliant with USMCA rules of origin, but only for the value of its U.S.-made content. As a result, a US-meaning truck built in Mexico that means 45% will still face a 25% tariff of 55% of its value.
The same concept will apply to auto parts that comply with USMCA’s rules of origin – non-US content will be taxed.
But it can be complicated to determine the level of these contents. USMCA-compliant auto parts will remain under tax until the Department of Commerce and the U.S. Customs and Border Protection determine the process of applying for tariffs to their non-U.S. content. The process does not specify a deadline.
Legal Principles
Trump’s new tariffs are based on a 2019 national security investigation into automatic imports conducted during his first presidency under Section 232 of the Trade Expansion Act of 1962. Trump previously used the Cold War-era trade law to impose 25% tariffs on steel and aluminum imports in 2018.
The Department of Commerce found that the market share of imported cars has been growing, which negatively impacts U.S. national security by eroding the U.S. industrial base and domestic automakers developing advanced technologies for military use.
At the time, Trump chose not to impose tariffs, but instead negotiated with trading partners to resolve these issues.
But on Wednesday, he concluded that these negotiations failed, the security threat to imports worsened, and that revisions to the USMCA and Korus did not enhance the U.S. position in the auto trade.
