A 25% tariff is hitting all imported cars and key components in the United States, disrupting the global automotive industry.
The tariff not only targets car manufacturers exporting vehicles to the U.S., including domestic brands, but also strikes at traditional automotive powerhouses like Japan and South Korea, which focus on car exports as a pillar of their economies.
On April 9, South Korea announced emergency support measures for its domestic automotive industry, attempting to mitigate the &#34;significant&#34; damage caused by President Trump's tariff policy. The amount of policy financing support was increased from the previously planned 13 trillion won to 15 trillion won (approximately 76.3 billion yuan).
Fitch Ratings previously published an analysis stating that Japanese, Korean, and German automakers such as Volkswagen and Hyundai would face significant impacts from this round of tariffs, while the prior U.S. tariff policies on Mexico and Canada would have a notably negative effect on Stellantis, Nissan, Honda, and General Motors.
Tesla is expected to be one of the least affected automakers by the tariffs, as its vehicles are manufactured in the U.S., and most components also come from domestic sources. Nevertheless, Tesla CEO Elon Musk stated that the tariffs have a &#34;huge&#34; impact on Tesla.
Global automakers are storing thousands of cars at U.S. ports and temporarily halting shipments to minimize the impact of Trump's escalating trade war.
However, whether it is the rising tariffs or the adjustments companies make to manage risks, the resulting costs will likely ultimately be borne by consumers.
<h2>01. Price Increases, Work Stoppages, Capacity Transfers</h2>
On April 6, Jaguar Land Rover announced a one-month suspension of car shipments to the U.S. to develop a longer-term response to Trump's automotive import tariffs.
On April 8, Stellantis halted the launch of its Chinese partner Leapmotor's T03 small electric vehicle in Poland and is considering alternative production plans.
Volkswagen Group plans to impose import fees on vehicles assembled outside the U.S., while Audi plans to suspend deliveries of vehicles assembled in Mexico and overseas that arrived at U.S. ports after April 2.
Some automakers with strong brand power announced price increases; Ferrari stated that some models would see a 10% price hike the day after the tariffs took effect.
Mercedes-Benz hopes to adjust its model lineup sold in the U.S., considering withdrawing entry-level models from the U.S. market and focusing on higher-margin models to absorb the tariff impact.
Toyota and Honda are still observing the situation, stating that they will temporarily maintain their prices.
Meanwhile, Ford launched a &#34;Nationwide Sharing&#34; promotional plan to lower prices and capture market share. The &#34;Raptor&#34; F-150 was reduced by 8%, and the Mustang Mach-E electric vehicle was subsidized to a price of $42,000, which is $3,000 cheaper than the Tesla Model Y.
The leading automotive portal and trading platform Cars.com ranked the most &#34;American&#34; cars based on five criteria: assembly location, parts content, engine origin, transmission origin, and U.S. manufacturing labor. The study analyzed over 400 models from the 2024 model year to determine the eligibility of the listed vehicles
In recent years, Tesla has ranked first on this list, which means that Tesla is expected to be one of the least affected automakers by tariffs, as its cars are manufactured in the United States and most of the parts also come from within the country.
Top 10 Most &#34;Americanized&#34; Models of 2024<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e27d5346-9467-45ff-88f2-5a50ade6b203.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e27d5346-9467-45ff-88f2-5a50ade6b203.png"/>
Even so, Tesla CEO and political ally of Trump, Elon Musk, has subtly criticized the U.S. tariff policy. On April 7, Musk released a famous video of economist Milton Friedman, in which Friedman promotes free trade by explaining how the components of a pencil require a complex supply chain, thereby indirectly opposing widespread high trade barriers.
The crisis quickly impacts the livelihoods of workers in the automotive manufacturing industry. In response to Trump's 25% tariff on foreign imported cars, Stellantis will temporarily close production in Canada and Mexico, putting 900 workers from five U.S. factories that produce parts on leave. Meanwhile, Stellantis' previous $5 billion investment commitment to Trump may also be affected by the tariffs.
Some media analyses suggest that the tariffs could severely impact the Mexican economy, where 1 million people are directly employed in the automotive industry, which accounts for about 4% of Mexico's GDP.
Trump has stated that the auto tariffs will be permanent, and that there will be no tariffs if cars are manufactured in the United States. So far, several global automakers, including Hyundai and Nissan, have expressed intentions to expand production and build factories in the U.S.
Trump views Hyundai's investment in the U.S. as a typical example of the tariff policy &#34;working&#34;: the world's third-largest automotive group announced before the tariff policy was announced that it would invest $21 billion in the U.S. over the next five years, including building a new steel plant, expanding electric vehicle production bases, and strengthening technological research and development, thereby reducing the impact of tariffs through localized production and meeting the U.S. government's demand for manufacturing return.
<h2>02. Japan, South Korea, and Germany are severely affected</h2>
Tariffs are also eroding markets outside the U.S. Porsche's sales in regions outside the U.S. fell in the first quarter, as the sports car manufacturer struggles to cope with increasing trade barriers, which could reduce profits in its most important markets.
Clemens Fuest, director of the Ifo Institute for Economic Research in Germany, stated: &#34;Given that the German economy is already stagnating, U.S. tariffs could push Germany's economic growth rate below zero, with key industries such as automotive and mechanical engineering being particularly hard hit.&#34;
According to data from the European Automobile Manufacturers Association, the U.S. is the largest export market for EU automobiles, with European automakers exporting cars worth a total of €38.4 billion to the U.S. in 2024, of which Germany's three largest automakers—Volkswagen, Mercedes-Benz, and BMW—account for about 73% of EU car exports to the U.S
Ferdinand Dudenhöffer, an automotive economics expert from Germany, pointed out that German automakers will have to lower their prices in the U.S. to remain competitive, but this will lead to significant profit losses. Additionally, since a 25% price reduction is unrealistic, the number of cars sold by these companies in the U.S. will also decrease significantly.
Based on this, on April 3, Ursula von der Leyen vowed that the EU would support target industries such as automotive and steel, and protect its market from being flooded with dumped goods that are forced out of the U.S. market. &#34;We will also closely monitor the indirect effects that these tariffs may have, as we cannot absorb global excess capacity and will not accept dumping in our market.&#34;
The European Commission stated that in response to Trump's steel tariffs, it would retaliate against U.S. exports worth up to €26 million. Ireland, France, and Italy have requested the removal of bourbon whiskey from the target product list.
Moreover, member states such as France and Germany urged the European Commission to crack down on U.S. service exports, including in the technology sector, and to pressure Italian Prime Minister Giorgia Meloni, who is friendly with Trump, for opposing the EU's escalation of countermeasures.
Meanwhile, the UK government is relaxing its electric vehicle targets and reducing punitive fines to support the domestic automotive industry. On April 6, Sir Keir Starmer announced that the deadline for phasing out new gasoline and diesel vehicles by 2030 would remain unchanged, but under the new plan, manufacturers would be allowed to sell full hybrid and plug-in hybrid vehicles until 2035.
On April 9, South Korea announced emergency support measures for its domestic automotive industry in an attempt to mitigate the impact of President Trump's tariff policies. The South Korean government stated that it expects these tariffs to cause &#34;significant&#34; damage to South Korean automakers and auto parts manufacturers.
Japan and South Korea are also important sources of automobile imports to the U.S., with total vehicle imports in 2024 expected to be $39.73 billion and $36.64 billion, respectively. For example, about 23% of Toyota's U.S. sales come from domestically produced vehicles in Japan, while Hyundai (including Kia) derives about 60% of its U.S. sales from South Korea, both facing tariff impacts. The Volkswagen Group's high-margin luxury models (including Porsche) will be affected, potentially weakening free cash flow.
To prevent liquidity issues, the South Korean government will increase its policy financing support for automakers in 2025 from the previously planned 13 trillion won to 15 trillion won (approximately 76.3 billion yuan).
Automotive service provider Cox Automotive previously predicted that tariffs would increase the cost of U.S.-made cars by $3,000 and the cost of cars made in Canada or Mexico by $6,000.
Automakers now must decide whether to localize production in the U.S. to avoid tariffs, absorb the costs, or pass them on to consumers. In the short term, car companies are expected to make tactical adjustments—redistributing capacity in U.S. plants, ramping up production, and avoiding large-scale capital expenditures. Additionally, it is expected that automakers may need to bear some of the tariff costs from suppliers, similar to the situation during the supply chain crisis caused by the pandemic
It is under such expectations that, before the implementation of the U.S. import tariffs on automobiles, a peculiar phenomenon emerged in the U.S. market: on one hand, Japanese and South Korean automakers hurriedly shipped cars and a large number of core components to the U.S., while on the other hand, American consumers launched a buying spree for foreign brand cars.
Financial magazine, original title: &#34;Responding to the Tariff War: Price Increases, Shutdowns, and Capacity Transfers in the Automotive Industry&#34;
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Responding to the tariff war: Price increases, shutdowns, and capacity transfers in the automotive industry

- A 25% tariff on all U.S. imported cars and key parts is disrupting the global automotive industry, affecting both domestic and foreign manufacturers.  
- In response, South Korea announced emergency support measures for its automotive sector, increasing financial aid to mitigate the significant damage from U.S. tariffs.  
- The tariffs are expected to raise costs for consumers, as automakers consider strategies like localizing production or absorbing costs to remain competitive in the U.S. market.

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Responding to the tariff war: Price increases, shutdowns, and capacity relocation in the automotive industry