Tariffs on Autos and Auto Parts

What’s Happening: Yesterday, President Trump held a press conference in the oval office to announce new 25-percent tariffs on imports of automobiles and auto parts. This wide-sweeping tariff, justified under Section 232 of the Trade Expansion Act of 1962, will take effect on April 2 alongside other announcements of reciprocal tariffs.

Why It Matters: These tariffs clock in as one of the largest in U.S. history, coming in after the previous announcement of tariffs on all imports from China, Mexico, and Canada. The United States imported over $240 billion worth of new passenger vehicles and light trucks in 2024, as well as nearly $200 billion worth of automobile parts. Additional tariffs on finished vehicles could raise costs for U.S. consumers and businesses between $31 billion and $60 billion depending on how much of the tariff is passed on. Factoring in parts and other components, these added costs increase to a minimum of $56 billion, according to the Shipment’s calculations. Also noteworthy about these tariffs is how they were rationalized. Section 232 is used to impose trade barriers to address national security concerns. The language used in the recent executive order states that, because only half of automobiles sold in the United States are produced domestically, this constitutes a threat to the U.S. industrial base and national security. To put it mildly, this sets a dangerous precedent that can be used to place tariffs on virtually any product, industry, or sector that has limited domestic capacity.

Looking Ahead: The likelihood that future exemptions will be dispensed for these tariffs is likely low given that President Trump has insisted the import duties will be permanent and has stressed the importance of tariff revenue for paying down debt. During the same press conference, the president confirmed that tariffs on pharmaceuticals and lumber are the next sectors that will face tariffs, and there are no further sectoral tariffs expected on April 2. Next week will provide some indication of the severity of U.S. tariffs on the rest of the world – and whether negotiating with trade partners is even an option.

Venezuelan Oil: The United States Tariffs the United States?

What’s Happening: On Monday, March 24, President Trump announced on Truth Social that the United States would impose a 25-percent tariff on Venezuela and any country that purchases Venezuelan oil or gas. This announcement was followed up with an official White House executive order, which restated that these tariffs would be made official on or after April 2, the intended date for U.S. reciprocal tariffs. The tariff on Venezuela and its trade partners, referred to as a “Secondary Tariff,” was justified as a response to Venezuela allowing illegal immigrants and gangs to enter the United States. This decision comes just one day after Venezuela finally agreed to accept repatriation flights of migrants from the United States. In response to these recent tariff threats, China (the main destination for Venezuelan crude oil) has condemned the move, while some Chinese traders have already committed to halting shipments.

Why It Matters: The day after President Trump’s announcement, the price of crude oil rose slightly, as many companies and countries remain uncertain of what this executive order will actually entail. Data on which countries purchase Venezuelan oil and gas and how much differ, but what is for certain is that a top importer in recent years has in fact been the United States. Data from the Observatory of Economic Complexity indicate that 85.5 percent of Venezuela’s crude petroleum exports went to the United States in 2023 while data from the U.S. Energy Information Administration places it at 23 percent. (Certainly a big spread, possibly because of a distinction between Venezuelan oil that is sent directly to the United States and oil that is sent elsewhere first for processing or refinement.) According to Dataweb, U.S. imports of Venezuelan crude oil and gas totaled roughly $2.9 billion in 2023, $4.6 billion in 2024, and $500 million in January 2025 alone. While of course the United States can’t put tariffs on itself, the decision seems hastily thought-through, and the economic damage it produces is likely to be immense. Other countries that should be worried about tariffs include China, Singapore, Malaysia, Vietnam, Russia, Spain, Cuba, and the Dominican Republic. If 25-percent tariffs were placed on each of these trade partners, it would impact almost $700 billion in U.S. imports and take recent tariffs on China from 20 to 45 percent, drastically raising the costs for most consumer goods.

Looking Ahead: As with many of the president’s tariff announcements, it is unclear whether this threat will be carried out or if it is simply another bargaining chip designed to extract a concession. Many countries currently purchasing oil and gas from Venezuela will likely be able to find alternatives, especially China, since Venezuelan energy makes up only a small portion of its total energy imports. The question is whether these countries will be able to switch with only one week’s notice before the tariffs strike. It is also unclear whether (or, more important, why) China, which makes up to 68 percent of Venezuelan oil exports, will pay the same tariff as Vietnam, which makes up 0.01 percent of exports. It is not likely that this move will have a major impact at the gas pump, but if 25-percent tariffs on countries that refuse to stay away from Venezuelan oil go into effect, that will drastically raise consumer costs.

Tariffs Implemented

February 4: 10-percent tariff on all imports from China.

March 4: 25-percent tariffs on all imports from Mexico and Canada alongside an additional 10-percent tariff on all imports from China.

March 5: Auto imports from Mexico and Canada are excluded from 25-percent tariffs for one month.

March 6: Imports from Mexico and Canada that fall under the USMCA are exempt from tariffs until April 2.

March 12: 25-percent tariffs on steel and aluminum.

Upcoming Tariffs:

April 1: Target date for USTR trade policy review and recommendations.

April 2: Reciprocal tariffs on many or all countries may take effect, delayed tariffs on Canada and Mexico may resume, and 25-percent tariffs on auto imports from all countries will take effect.

April 2–4: Auto imports from Mexico and Canada may be subject to 25-percent tariffs.

Unspecified Date: Various tariffs on pharmaceuticals, semiconductors, automobiles, copper, the EU and BRICS countries.