Trump’s Auto Tariff Changes: Impact on OEMs and EV Supply Chains
President Donald Trump this week signed an executive order adjusting his Section 232 auto import tariffs. While the 25% levy on imported passenger vehicles remains intact, the administration will forgo stacking additional 25% duties on steel and aluminum inputs. The order also introduces a retroactive rebate mechanism for carmakers and new conditional rebates on auto parts imports, aiming to soften cost pressures amid global supply chain disruptions.
Tweaks to Tariff Structure
The revised directive retains:
- 25% tariff on imported cars and SUVs;
- 25% steel and aluminum tariffs will not add on top of vehicle duties;
- A 25% levy on parts with rebates capped at 3.75% of vehicle value in year one, 2.5% in year two;
- Retroactive refunds for automakers already paying steel/aluminum duties on imports.
Impact on OEM Production and Costs
Automakers export roughly 2 million units to the U.S. annually. Excluding additive metal duties reduces estimated cost hikes per vehicle from $1,200 to approximately $900—calculated using average steel prices of $800 per metric ton and aluminum at $2,100 per ton. CFOs at Detroit’s Big Three have warned these tariffs could erode operating margins by 2–3 percentage points.
Impact on EV Supply Chains
Electric vehicle makers rely on high-grade aluminum and specialized steel alloys for battery enclosures and chassis. Tariff relief on stacked metal duties helps contain costs for models like the Tesla Model 3 and Ford F-150 Lightning. However, semiconductors and battery cell imports remain untaxed under Section 301, preserving supply chain resilience for critical components manufactured in Asia.
Global OEM Production Strategies
In response, several foreign OEMs—including Toyota and Volkswagen—are accelerating capacity expansions in Mexico and Canada to qualify under USMCA for tariff-free access. Industry analysts predict a 15% shift of European exports to North American plants by 2026. These onshore investments, valued at over $20 billion, hedge against future policy volatility.
Economic and Legal Outlook
Trade law experts note the executive order refines but does not repeal Section 232 authority. Congress and the WTO are monitoring potential challenges. The European Union has threatened retaliatory tariffs on U.S. agricultural and chemical exports if the car levies remain unchanged, signaling a possible escalation in transatlantic trade disputes.
Looking Ahead
While the administration’s partial rollback eases immediate cost pressures, automakers and suppliers will continue lobbying for full tariff repeal. The effectiveness of rebate administration and ongoing geopolitical tensions will determine if this compromise stabilizes the U.S. auto market or sets the stage for renewed trade debates.