Auto parts tariffs 2025 will go into effect at 12:01 am ET this Saturday, imposing a 25% import tax on most car components — a move expected to significantly raise vehicle costs for American consumers and disrupt the auto manufacturing industry.
Unlike previous tariffs that spared U.S.-assembled cars, the new levies impact virtually every vehicle built in the United States. According to government data, not one of the 10 million cars manufactured in the U.S. last year was made entirely from domestic parts.
“Frankly, from my perspective, (the parts tariffs) looks worse for the broader economy than the tariffs on imported vehicles,” said Jonathan Smoke, chief economist at Cox Automotive, during a recent Automotive Press Association webinar.
More than 50% of the components used in U.S.-assembled cars are sourced from overseas. However, not all imports will be taxed equally. Parts from Canada or from Mexican suppliers paying at least $16 per hour are considered compliant under the US-Mexico-Canada Agreement (USMCA), meaning most Canadian parts will be exempt, while many Mexican parts will not.
To ease the burden, the White House has introduced a temporary refund program. Automakers may reclaim up to 3.75% of the vehicle price against their parts tariff bill in year one, decreasing to 2.5% in year two and phasing out in the third year.
Even with those offsets, estimates suggest the new tariff could raise the cost of producing each vehicle by an average of $4,000 — an expense that is likely to be passed on to buyers.
As the full impact of the tariff unfolds, industry experts warn of slowed production, higher car prices, and a ripple effect across the broader economy.