The Trump administration claims its 25% tariff on foreign cars and auto parts will promote business of vehicles made entirely in the U.S., but such all-American cars don’t exist, and they may never.
Given that today’s U.S. automakers purchase many parts of about 30,000 cars from abroad, it’s unlikely that the prospect of shifting to the whole family supply chain is shifted to the whole family supply chain. “This won’t happen,” Stephanie Brinley, a leading automotive analyst at S&P Global Mobility, told Observer. “I don’t envision space where 100% of the parts of any vehicle are produced in the United States.”
Nevertheless, U.S. cars remain at the heart of President Donald Trump’s justification for tariffs, which were originally scheduled to start imported cars on April 3 and develop on May 3. “I hope they raise prices because if you do that, people will buy American-made cars. We have a lot of them,” he said.
The largest automakers such as General Motors (GM) and Toyota (Toyota) produce nearly half of their vehicles for sale in the United States. Small companies like Elon Musk’s Tesla make American cars at home. But even Tesla (TSLA), Y model Y was named the “most American” car on Cars.com in 2024, but still relies on imported parts and components. According to the National Highway Traffic Safety Association, only 70% of the Y model consists of U.S. or Canadian auto parts, while the rest is mainly from Mexico.
On average, domestic manufacturers of automakers import 40 to 50 percent of parts from abroad, Dan Ives of Wedbush Securities said in an analyst. “The concept of the American automaker comes from parts that aren’t a fictional story,” he added. According to analysts, only 10% of the automotive supply chain can take three years and lose tens of billions of dollars in the industry.
Electric car manufacturers import batteries from China
Electric cars have fewer components than internal combustion engine (ICE) cars, but they still rely on countries such as China to use lithium and lithium-ion batteries. Localized production is by no means easy. “It could take ten years to get the lithium ore to start and run it,” Brynley said.
At the same time, the impact of tariff components will be felt throughout the industry. For car owners, repair costs could rise, Jessica Caldwell, head of insights at Edmunds, said in a statement. She added that higher repair prices would harm dealers, and the increase in costs associated with vehicle accidents could increase insurance premiums.
According to the Trump administration, currently, automotive components from Canada and Mexico comply with the U.S.-Mexico-Canada (USMC) trade agreement until U.S. customs and border protection measures established a system that applies tariffs to non-U.S. regions.
The interdependence of the industry’s supply chain is particularly evident in North America, where some components cross the boundaries of each country during the assembly of cars. For example, a seemingly simple part, such as a car seat, can be back and forth in components such as seat frames, seat foam, and headrests before putting it into the vehicle.
The complex nature of auto parts manufacturing means it is difficult to accurately measure the impact of tariffs. “It’s hard for consumers to understand why their vehicles are more expensive,” Brinley said.
A rough estimate is that consumers will soon see prices between $5,000 and $10,000 on average cars, Wedbush’s Ives said. According to automakers’ inventory, hiking prices may start within 50 to 60 days after the tariffs take effect, Brynley noted.
