Trump places 25% tariff on imported autos. Carmakers could face higher costs and lower sales

WASHINGTON (AP) — President Donald Trump said he was placing 25% tariffs on auto imports, a move the White House claims would foster domestic manufacturing but could also put a financial squeeze on automakers that depend on global supply chains.

“This will continue to spur growth,” Trump told reporters Wednesday. “We'll effectively be charging a 25% tariff.”

The tariffs, which the White House expects to raise $100 billion in revenue annually, could be complicated as even U.S. automakers source their components from around the world. The tax hike starting in April means automakers could face higher costs and lower sales, though Trump argues that the tariffs will lead to more factories opening in the United States and the end of what he judges to be a “ridiculous” supply chain in which auto parts and finished vehicles are manufactured across the United States, Canada and Mexico.

To underscore his seriousness about the tariffs directive he signed, Trump said, “This is permanent.”

The Republican president reiterated his willingness to challenge allies by saying Thursday on social media that if the European Union coordinated with Canada, tariffs “far larger than currently planned” would be placed on them in retaliation.

Shares in General Motors tumbled roughly 7% in Thursday trading. Ford's stock fell about 4%. Shares in Stellantis, the owner of Jeep and Chrysler, dropped 1.25%. But the stock prices of electric vehicle makers Tesla and Rivian were up.

The American Automotive Policy Council, which represents domestic automakers, said in a statement that “it is critical that tariffs are implemented in a way that avoids raising prices for consumers and that preserves the competitiveness of the integrated North American automotive sector,” which depends on the U.S.-Mexico-Canada trade deal negotiated during Trump's first term.

The group's president, former Republican Gov. Matt Blunt of Missouri, said in an email response to questions from The Associated Press that “we have clearly expressed concerns related to prices and other impacts to the administration as well as our belief that a modernized” North American trade agreement should remain in place."

Trump has long said that tariffs against auto imports would be a defining policy of his presidency, betting that the costs created by the taxes would cause more production to relocate to the United States while helping narrow the budget deficit. But U.S. and foreign automakers have plants around the world to accommodate global sales while maintaining competitive prices — and it could take years for companies to design, build and open the new factories that Trump is promising.

"We’re looking at much higher vehicle prices,” said economist Mary Lovely, senior fellow at the Peterson Institute for International Economics. “We’re going to see reduced choice. ... These kinds of taxes fall more heavily on the middle and working class.’’

She said more households will be priced out of the new car market — where prices already average about $49,000 — and will have to hang on to aging vehicles.

The tariffs on autos would start being collected on April 3, Trump said. If the taxes are fully passed onto consumers, the average auto price on an imported vehicle could jump by $12,500, a sum that could feed into overall inflation. Trump was voted back into the White House last year because voters believed he could bring down prices.

Foreign leaders were quick to criticize the tariffs, a sign that Trump could be intensifying a broader trade war that could damage growth worldwide.

“This is a very direct attack,” Canadian Prime Minister Mark Carney said. “We will defend our workers. We will defend our companies. We will defend our country.”

In Brussels, European Commission President Ursula von der Leyen expressed regret at the U.S. decision to target auto exports from Europe and vowed that the bloc would protect consumers and businesses.

“Tariffs are taxes — bad for businesses, worse for consumers equally in the U.S. and the European Union,” she said in a statement, adding that the EU’s executive branch would assess the impact of the move, as well as other U.S. tariffs planned for coming days.

Mexican President Claudia Sheinbaum said Thursday that her country did not want to be drawn into taking positions with each new tariff, but that under the trade pact from Trump's first term that “there shouldn’t be any tariffs, that is the essence of the commercial treaty.”

As Trump announced the new tariffs, he indicated that he would like to provide a new incentive to help car buyers by allowing them to deduct from their federal income taxes the interest paid on auto loans, so long as their vehicles were made in America. That deduction would eat into some of the revenues that could be generated by the tariffs.

The new tariffs would apply over time to both finished autos and parts used in the vehicles, according to a White House official who spoke on condition of anonymity to discuss the taxes on a call with reporters. The tariffs would be on top of any existing taxes and were legally based on a 2019 Commerce Department investigation that occurred during Trump's first term on national security grounds.

Trump’s directive creates the space to preserve auto parts trade with Canada and Mexico, as the Trump administration has to figure out how it could implement auto parts taxes on those trading partners. The administration's goal is for the 25% tariffs to only apply to non-U.S. content.

The administration is reasoning that there is excess capacity at U.S. automakers that will enable them to ramp up production to avoid the tariffs by manufacturing more domestically, with the official noting that automakers have known since the Trump campaign that tariffs were coming.

The auto tariffs are part of a broader reshaping of global relations by Trump, who plans to impose what he calls “reciprocal” taxes on April 2 that would match the tariffs, sales taxes charged by other nations.

Trump has already placed a 20% import tax on all imports from China for its role in the production of fentanyl. He similarly placed 25% tariffs on Mexico and Canada, with a lower 10% tax on Canadian energy products. Parts of the Mexico and Canada tariffs have been suspended, including the taxes on autos, after automakers objected and Trump responded by giving them a 30-day reprieve that is set to expire in April.

The president has also imposed 25% tariffs on all steel and aluminum imports, removing the exemptions from his earlier 2018 taxes on the metals. He also plans tariffs on computer chips, pharmaceutical drugs, lumber and copper.

His taxes risk igniting a broader global trade war with escalating retaliations that could crush global trade, potentially hurting economic growth while raising prices for families and businesses as some of the costs of the taxes get passed along by importers. When the European Union retaliated with plans for a 50% tariff on U.S. spirits, Trump responded by planning a 200% tax on alcoholic beverages from the EU.

Trump also intends to place a 25% tariff on countries that import oil from Venezuela, even though the United States also imports oil from that nation.

Trump's aides maintain that the tariffs on Canada and Mexico are about stopping illegal immigration and drug smuggling. But the administration also wants to use the tariff revenues to lower the budget deficit and assert America's preeminence as the world's largest economy.

The president on Monday cited plans by South Korean automaker Hyundai to build a $5.8 billion steel plant in Louisiana as evidence that tariffs would bring back manufacturing jobs.

Slightly more than 1 million people are employed domestically in the manufacturing of motor vehicles and parts, about 320,000 fewer than in 2000, according to the Bureau of Labor Statistics. An additional 2.1 million people work at auto and parts dealerships.

The United States last year imported nearly 8 million cars and light trucks worth $244 billion. Mexico, Japan and South Korea were the top sources of foreign vehicles. Imports of auto parts came to more than $197 billion, led by Mexico, Canada and China, according to the Commerce Department.

Associated Press writer Rob Gillies in Toronto and AP Economics Writer Paul Wiseman contributed to this report.

New German cars are stored at a logistic center in Duisburg, Germany, Thursday, March 27, 2025. (AP Photo/Martin Meissner)

FILE - This is the grill on a GMC Sierra Heavy Duty Denali HD 2500 truck on display at the Pittsburgh International Auto Show in Pittsburgh, Feb. 15, 2024. (AP Photo/Gene J. Puskar, File)

New Toyota vehicles are stored at the Toyota Logistics Service Inc., an imports processing facility at the Port of Long Beach in Long Beach, Calif., Wednesday, March 26, 2025. (AP Photo/Damian Dovarganes)

New German cars are stored at a logistic center in Duisburg, Germany, Thursday, March 27, 2025. (AP Photo/Martin Meissner)

New German cars are stored at a logistic center in Essen, Germany, Thursday, March 27, 2025. (AP Photo/Martin Meissner)

New Mazda SUVs are transported at the Port of Long Beach in Long Beach, Calif., Wednesday, March 26, 2025. (AP Photo/Damian Dovarganes)

New Toyota vehicles are stored at the Toyota Logistics Service, their most significant vehicle imports processing facility in North America, at the Port of Long Beach in Long Beach, Calif., Wednesday, March 26, 2025. (AP Photo/Damian Dovarganes)

President Donald Trump waves after speaking at a reception celebrating Women's History Month in the East Room of the White House, Wednesday, March 26, 2025, in Washington. (AP Photo/Mark Schiefelbein)

President Donald Trump speaks at a reception celebrating Women's History Month in the East Room of the White House, Wednesday, March 26, 2025, in Washington. (AP Photo/Jacquelyn Martin)

President Donald Trump arrives at the annual St. Patrick's Day luncheon at the Capitol in Washington, Wednesday, March 12, 2025. (AP Photo/J. Scott Applewhite)

WASHINGTON (AP) — The defense secretary's decision to review military standards on combat and physical fitness and appearance opens a Pandora’s box of widely differing rules among the services. And it will raise a crucial question: Should there be a cookie-cutter approach, or should service differences, evolving social norms and recruiting realities play a role in policy decisions?

Pete Hegseth has been very public about his opposition to women in combat jobs and his belief that standards were lowered to accommodate women, and he warned there would be reviews to address the issues. He is a staunch proponent of making all standards the same, regardless of gender, and military officials are braced for changes as reviews continue.

In a March 12 memo, Hegseth said the undersecretary for personnel must gather information on military standards “pertaining to physical fitness, body composition, and grooming, which includes but is not limited to beards.”

“We must remain vigilant in maintaining the standards that enable the men and women of our military to protect the American people and our homeland as the world’s most lethal and effective fighting force,” he wrote.

The effort is seen as a broadside against women serving on the front lines — which they have been doing successfully for years. Hegseth's memo calls for a review of how standards have changed and the impact of those shifts since Jan. 1, 2015 — the year the Defense Department opened all combat jobs to women.

And it raises questions about whether he wants to make all fitness tests the same for the services and make them all gender- and age-neutral or whether he will set minimum standards and allow the services to require more stringent requirements as desired.

Eliminating the current policy of scoring annual fitness tests based on age and gender could hurt retention and recruitment if troops are suddenly told to meet a new, dramatically harder requirement. Such changes are generally phased in over time.

Here's a look at the current standards.

The military has long had what is largely a two-part system for physical fitness standards:

Right now, the fitness tests are a hodgepodge.

Each service has basic tests that all service members must pass once or twice a year. For every service, the tests vary. Scoring is adjusted for gender and age. For example: A 20-year-old man must complete a run in a faster time than a woman or a 30-year-old man in order to receive the maximum score.

Fitness tests used to be simpler: a run, push-ups and sit-ups. They evolved over time and now can include options. For example, Air Force service members can do either a 1 1/2-mile run or a sprint. Other services will, at times, allow biking or rowing as a cardio substitute for the run; planks are now more widely used than sit-ups.

The Army and Marines have more extensive fitness tests.

The Army, in a major overhaul several years ago, expanded its fitness test to six events, including a dead lift, run, planks, push-ups, standing power throw and a combination sprint/drag/carry. The events were meant to mimic real-world military circumstances. An early plan to make that test gender and age neutral was scrapped after studies showed problems.

The Marine Corps has two tests a year. In the first half, Marines take a physical fitness test that includes a three-mile run, pull-ups and planks. In the second half of the year, they take a combat fitness test that includes an 880-meter run in combat boots, an ammo-can lift and an exercise that mimics troops’ maneuvers under fire.

The maneuver portion includes an obstacle course with a low crawl, high crawl and sprint, as well as dragging a person and using the fireman’s carry.

Specific military jobs like special operations, infantry, armor and pararescue jumping require different, higher-level physical — and often mental and psychological — tests, requirements and qualification courses.

Those standards require everyone to meet the same gender- and age-neutral requirements. For example, an Army soldier who wants to be a Green Beret or a sailor who wants to be a SEAL must pass those grueling months-long qualification courses.

Also, after the Pentagon allowed women to be in all combat jobs, the Army set specific fitness standards for each military occupation that are the same regardless of sex or age. Recruits who want to serve in an infantry or armor job must pass a specific physical assessment that has higher, more significant demands, in order to sign a contract for that specialty.

Over the years, a wide array of standards and requirements have been adjusted for reasons ranging from religious tolerance to recruiting and evolving societal trends.

In large part, they are driven by recruiting struggles and the need to woo those from a changing universe of American young people, including those with less academic schooling or people from states where marijuana is legal.

The Navy, for example, began in 2022 to enlist more recruits who score very low on the Armed Services Qualification Test. That was to help meet recruiting goals. A year later, it began to bring in people who didn’t graduate from high school or get a GED. Both were shifts that the other services have largely avoided. The Navy argued that it needed those lower-scoring recruits to fill jobs that involve intense manual labor.

Hegseth has said little about that type of standard and has focused on physical rather than mental fitness.

In addition, several services have changed policies on hair and beards. They now allow different buns and ponytails for women, and beards in certain circumstances for either medical or religious reasons. And most of the services have relaxed policies on marijuana in recent years.

Similarly, they have all loosened restrictions on the size and placement of tattoos, opening the door to full-sleeve tattoos. Most now allow small ones on the neck or finger.

Defense Secretary Pete Hegseth prepares to give a television interview outside the White House, Friday, March 21, 2025, in Washington. (AP Photo/Mark Schiefelbein)

FILE - Female Marines go through one of the obstacles in the so-called confidence course at Parris Island Recruit Depot, S.,C., on May 27, 2020. (AP Photo/Lolita Baldor, File)