Trump's Trade Deals: Winners and Losers in the Shifting Automotive Landscape

Strategic Insights -

President Trump's new trade deals with Japan and the European Union are creating a complex landscape for the automotive industry, with foreign automakers potentially incentivized to import more cars to the U.S. rather than building plants in America. This approach contradicts Trump's goal of strengthening the U.S. economy by forcing foreign manufacturers to set up factories in the country. The tariffs imposed on imported vehicles and car parts from Japan and Europe are significantly higher than those paid before Trump took office, but may still be lower than the costs of building cars in the U.S.

Key Takeaways:

  • The tariffs on cars imported from Japan or Europe will face a 15% tariff, starting August 1, which is still significantly higher than the 2.5% they had been paying before Trump took office.
  • U.S.-built cars are taxed 25% on imported parts, except for those that comply with the U.S.-Mexico-Canada trade agreement signed by Trump in his first term.
  • Cars built in Canada and Mexico, already taxed at 25%, face even higher tariffs beginning August 1, with the new rate for Canada being 35% and for Mexico being 30%.
  • The beneficiaries of Trump's trade policies are Japan, the UK, and the EU, as they can move forward with their strategies for serving the U.S. market.
  • The losers are the countries still negotiating, like South Korea, Mexico, and Canada, as well as U.S. automakers that produce vehicles in those countries.
  • Japanese and European carmakers may be enticed to import more cars to the U.S., even with the 15% tariff, to avoid other levies.
  • The UAW has expressed concerns that Trump's trade policy will lead to the outsourcing of jobs and the worsening of the situation for workers.
  • The White House maintains that U.S. trade policy is aimed at restoring American auto industry dominance and restoring jobs for American workers.

Statistics:

  • The tariffs on cars imported from Japan or Europe will be 15% starting August 1.
  • The tariffs on U.S.-built cars for imported parts will be 25%, except for those complying with the U.S.-Mexico-Canada trade agreement.
  • The tariffs on cars built in Canada and Mexico will be 35% for Canada and 30% for Mexico starting August 1.
  • The U.S. pays 7.5% tariffs on imported vehicles inside the USMCA, on average (potential future scenario).

Sources:

  • Axios, "Trump's new trade deals could incentivize automakers to import more cars to the U.S.", 2025, 07/23
  • White House spokesperson Kush Desai, quoted in Axios, 2025, 07/23
  • James Schmidt, vice president-autos for the Oliver Wyman consultancy, quoted in Axios, 2025, 07/23
  • David Steinert, a partner in the automotive and industrial practice at the consulting firm AlixPartners, quoted in Axios, 2025, 07/23
  • UAW statement, quoted in Axios, 2025, 07/23