By: Marta Bengoa
The Trump administration's announcement yesterday of 25% tariffs on imported automobiles and auto parts under Section 232 "national security" provisions marks another troubling step. This move, layered on top of existing steel and aluminum tariffs, threatens to cascade into economic disruption beyond the auto sector. With U.S. automobile imports valued at approximately $275 billion annually and the industry employing around 1.5 million workers, these tariffs will create substantial price distortions in a market central to American consumer spending. For vehicles from countries already facing other tariffs, the compounded rates could reach 45% or higher — an extraordinary burden that will inevitably be transferred to American consumers.
The invocation of "national security" to justify these tariffs stretches credibility beyond breaking point. How exactly do imports from Mexico, South Korea, Japan, and the European Union — all steadfast U.S. allies — constitute a national security threat? This transparent abuse of Section 232 undermines not only economic logic, but the very legal frameworks designed to prevent arbitrary trade barriers. With the announcement of "reciprocal tariffs" coming on April 2, we appear to be entering a new phase of economic isolation with still-undefined scope and targets. The cumulative effect creates an environment of extreme uncertainty for businesses, investors, and trading partners. Supply chains built over decades cannot be reconfigured overnight, and the adjustment costs will be enormous.
The latest action also directly contradicts the USMCA agreement that the Trump administration itself negotiated during the previous term. The agreement specifically shielded Mexico and Canada from precisely these types of automotive tariffs through side letters that exempt these nations from Section 232 actions. This contradiction reveals either a stunning policy incoherence or a willful disregard for the United States’ treaty obligations — neither interpretation inspires confidence.
The global ramifications will be swift and severe. Mexico, as America's largest trading partner and a critical link in North American automotive supply chains, stands to suffer immediate economic damage. South Korea, Japan, and the European Union — all major exporters of vehicles to the U.S. market — will undoubtedly respond with retaliatory measures targeting American exports. The administration seems to have learned nothing from the tit-for-tat tariff escalations of the previous term, which damaged U.S. agricultural exports and manufacturing without achieving meaningful policy goals.
The impact on American consumers will be immediate and painful. Higher vehicle prices will reduce purchasing power across the economy, potentially accelerating inflation at a time when Americans are already struggling with elevated costs. The downstream effects on consumer spending in other sectors could trigger broader economic contraction. For U.S. consumers, the impact will be direct and measurable. Industry analysts estimate that the average imported vehicle price could rise by $5,000-$11,000 depending on origin country and existing tariff structures. Such increases will likely suppress consumer spending across sectors at a delicate economic moment.
For an administration claiming to prioritize American workers, these policies are particularly perplexing. The automotive industry is now global, with integrated supply chains spanning multiple countries. Disrupting these networks doesn't "bring jobs back" — it endangers existing jobs by making American manufacturing less competitive globally. When similar measures were implemented on washing machines in 2018, research showed that each protected manufacturing job cost consumers approximately $820,000 through higher prices and destroyed jobs in linked and downstream industries. The irony is that these protectionist measures may ultimately accelerate the very trends they aim to counter. As imported vehicles become prohibitively expensive, foreign manufacturers will face increased pressure to relocate production to the U.S. — not with American workers but with automation technologies that minimize labor costs. The result could be fewer, not more, American automotive jobs.
The fundamental contradiction in the Trump administration’s approach to trade policy remains unresolved: a strong economy cannot be built on weak economic thinking. Tariffs are not a strategy; they are a symptom of strategic absence. Real economic security comes from competitive strength, not protective barriers. The administration would be better served by focusing on investments in workforce development, infrastructure, and research — areas where government action could genuinely strengthen the United States’ competitive position without distorting markets or antagonizing allies. Instead, with these auto tariffs, we take another step down a path of economic self-harm, where even victory would constitute defeat.
Marta Bengoa is a Non-Resident Fellow at ORF America.