President Donald Trump announced sweeping 25% tariffs on cars “not made in the U.S.” on Wednesday, sending shockwaves through global automakers. Shares of several automakers declined after the announcement, with Ford pulling back more than 7% and General Motors slipping nearly 4%. Japanese carmakers are particularly in dire straits, with Toyota likely to be the worst hit due to its huge U.S. exposure.
According to U.S. car marketplace Carpro, Toyota took the top spot in the U.S. by sales volume in 2024, with 1.98 million vehicles sold during the year, beating domestic heavyweights Ford and Chevrolet. Vivek Vaidya, global client leader for mobility at research firm Frost & Sullivan, said, “In a nutshell, the USA is an irreplaceable market for Asian automakers. Market leaders from Japan and Korea would be hugely impacted by this [tariff] announcement.”
Even if automakers wanted to shift production to the U.S. to avoid tariffs, moving factories is not an “overnight proposition” and would take billions of dollars, according to Joe McCabe, president and CEO at AutoForecast Solutions.
Richard Kaye, portfolio manager at asset management group Comgest, said, “The idea that they can remove any Mexican and, to a certain extent, Canadian supply from their supply chain is ridiculous. They will face higher prices in the U.S. because of tariffs.
Trump’s tariffs impact global carmakers
And the big question for them is, do I swallow it or do I ask the consumer to swallow it? Presumably, they will swallow it, and that’s going to be very tough.”
A March 27 report revealed South Korea was the second-largest exporter of automobiles to the U.S. in 2024, with 1.4 million vehicles shipped, behind Mexico’s 2.5 million, while Japan exported 1.3 million. Automobiles are Japan’s top export to the U.S., accounting for 28.3% of all shipments.
In 2024, shipments to the U.S. hit a record high, with U.S. deliveries accounting for 36.5% of Japan’s total auto exports. The aim of the tariffs is to restore carmaking to America. But it will come at a high cost.
Raised prices will hit sales and reduce choice for American consumers. Carmakers, meanwhile, will be “liberated” from large chunks of their profits.
Image Credits: Photo by Bent Van Aeken on Unsplash
