GlobalData has carried out detailed analysis on the likely impact of tariffs on automotive imports to the US, including both finished Light Vehicles (LVs) and automotive parts.
The following represents a summary of the tariffs that relate to the automotive industry:
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As of April 3rd, 25% tariffs are in effect on imports of finished vehicles. While this applies to all countries, vehicles from Canada and Mexico that are compliant with the USMCA trade agreement rules are subject to taxes only on their non-US content. US content is defined as “the value of parts “wholly obtained, produced entirely, or substantially transformed in the United States.”
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For vehicles not compliant with the USMCA and imported from Canada or Mexico, additional 25% tariffs stack on top of existing tariffs, raising the total to 50% in some cases.
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25% tariffs on a number of automotive parts – including engines, transmissions, powertrain and electrical components – will go into effect on May 3rd. Parts that are compliant with the USMCA rules will not be taxed until the US Commerce Department establishes a process to apply the tariff to only non-US content.
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25% tariffs on steel and aluminum imports are also in effect. Derivative products of these metals are also subject to tariffs, which would include some automotive parts such as bumpers. There are no exemptions for certain trading partners, as had previously been the case.
The impact of these tariffs will be far-reaching, given that around 47% of LVs sold in the US in 2024 were assembled outside the country, and those that were built in the US generally contain significant percentages of imported content.
While some of the additional costs may be absorbed by OEMs and the supply chain, we expect the majority of the cost increases to be passed on to the consumer. This will exacerbate existing problems with affordability in the US market and therefore decrease sales.
Our Q1 2025 forecast called for 16.1 mn US sales in 2025, and 16.4 mn units in 2026. However, that forecast was produced before the latest announcements and assumed that the threat of tariffs was largely a negotiating tactic that was being used to extract concessions from other countries. While we did factor in a slight negative impact on sales due to the uncertainty being created by the constantly changing trade picture, we did not assume that any tariffs would actually go into effect. We now estimate 2025 US sales at 14.9 mn units. This represents a decrease of 6.6% YoY and a reduction of 1.2 mn from our Q1 2025 forecast. For 2026, we expect sales to decline further, to 14.5 mn units, with the tariffs assumed to be in effect for the full year. We assume that the tariffs remain in place permanently, as it could be difficult for future administrations to remove them due to Union opposition. Over time, greater localization of production and adjustments in consumer expectations around pricing could see sales gradually recover, while remaining below the pre-tariff outlook.
