Trump announces 25% auto tariffs. What it means for Minnesotans looking to buy a car
- President Trump will impose a 25% tariff on imported passenger vehicles, light trucks, and some auto parts starting April 2.
- Auto experts predict that the new tariffs will lead to higher prices for consumers on both new and used vehicles.
- The tariffs are expected to impact the cost of maintenance and insurance premiums as well.
- While the tariffs aim to boost U.S. auto manufacturing, experts believe the immediate impact will be increased costs for consumers.
Car prices saw a dramatic upswing in the aftermath of the pandemic. Now, experts are warning consumers to prepare for more price hikes spurred by a new tariff on auto imports.
Starting April 2, President Donald Trump is set to impose a 25% tariff on imported passenger vehicles, light trucks and some auto parts. For imported cars protected by the United States-Mexico-Canada Agreement, only the foreign parts that make up the vehicle will be subject to the tariff.
“We’re going to charge countries for doing business in our country and taking our jobs, taking our wealth,” Trump said inside the Oval Office, later adding that the tariffs will "spur growth like you haven’t seen before.”
The move follows a temporary tariff exemption granted earlier this month at the behest of three large U.S. automakers. After the monthlong reprieve, auto experts say higher prices are likely on the horizon.
"You're going to see price increases," said Ivan Drury, director of insights at automotive research site Edmunds. "It's such a shotgun approach. Virtually nothing goes unscathed."
What auto tariffs mean for consumers
In a Wednesday sales forecast call, Cox Automotive chief economist Jonathan Smoke said massive increases in tariffs would be “highly disruptive” to North American vehicle production, potentially leading to tighter supply and higher prices.
“By mid-April, we expect disruptions,” Smoke said. “We expect sales to fall, new and used prices to increase, and some models to be eliminated if those tariffs persist.”
Drury said price increases will likely vary. Some companies may pass price hikes from the 25% tariff directly to consumers, while others may bear some of the costs to remain competitive and ease cost pressures in other ways, such as reducing incentives.
Maintenance costs and insurance premiums
But with the tariff expected to hit both imported vehicles and key auto parts like engines and transmissions, Drury said consumers can expect price hikes "across the board." That includes new cars, used cars, maintenance costs and even insurance premiums, since accidents involving new parts would be more costly.
Cars assembled in the U.S. wouldn't be safe from tariffs either, Drury said, as they import parts from other countries.
"There is no vehicle that is 100% American in that regard," Drury said. Used vehicles will see "a bit more lag time, but there will be an effect."
Wedbush Securities analyst Daniel Ives said questions remain on exactly how these tariffs will be applied or whether they will be altered in the coming weeks. In their current form, he estimates they could push up the average car price $5,000 to $10,000, depending on the make and model.
The tariffs "would be a hurricane-like headwind to foreign (and many US) automakers," Ives said in a Wednesday note. But "we continue to believe this is some form of negotiation and these tariffs could change."
If tariffs do hold, they could encourage increased investment in U.S. manufacturing and a more resilient auto industry, according to a note from Jessica Caldwell, Edmunds’ head of insights. But those potential long-term benefits will take time.
"For consumers navigating higher prices in the short term, the promise of future gains may feel distant — at least for now," Caldwell said.
What cars are made in America?
Trump's move is in hopes of pushing automakers to make vehicles in the U.S.; however, no company does that in its entirety. All automakers source at least some parts internationally, according to USA TODAY.
Cars.com ranks the "most American" cars, and Tesla, which is headed by Department of Government Efficiency leader Elon Music, regularly makes the top of the list. Here's how the cars rank:
- Tesla Model Y, assembled in Fremont, California, and Austin
- Honda Passport, assembled in Lincoln, Alabama
- Volkswagen ID.4, assembled in Chattanooga, Tennessee
- Tesla Model S, assembled in Fremont, California
- Honda Odyssey, assembled in Lincoln, Alabama
- Honda Ridgeline, assembled in Lincoln, Alabama
- Toyota Camry, assembled in Georgetown, Kentucky
- Jeep Gladiator, assembled in Toledo, Ohio
- Tesla Model X, assembled in Fremont, California
- Lexus TX, assembled in Princeton, Indiana
Tesla and Minnesota
Tesla has a number of stores in the North Star State, including in Golden Valley, Lake Elmo, Bloomington, Rogers and Maplewood, according to the company's website.
Minnesota Governor Tim Walz made negative statements about the company, but took back his statement during a town hall in Rochester, according to a FOX 9 report.
"I was making a joke. These people have no sense of humor," Walz said. "They are the most literal people, the most literal people. But my point was they are all mad, and I said something I probably shouldn’t have about a company."
Walz took back his comment as violence against Tesla properties started. The Federal Bureau of Investigation issued a warning on violent attacks on Tesla vehicles and dealerships nationwide. These attacks are taking place as backlash against Musk.
According to a YahooFinance report, in 2024 the State of Minnesota held more than 1.6 million shares of Tesla stock in its retirement fund, per a Minnesota State Board of Investment Report.
Minnesota introduces a surcharge fee on electric vehicles
Minnesota legislators are looking at a bill introduced by State Sen. Jeff Howe, R-Rockville, that would increase the surcharge fee on all-electric and plug-in hybrid vehicles, which also includes motorcycles. If Howe's bill is approved the annual fee would increase from $75 to $100.
"Considering the wear and tear on our roads, this bill simply ensures everyone is paying their fair share for driving in our state, regardless of whatever vehicle they choose to buy,” Howe said in a release. “Funds from the gas tax usually cover wear and tear on our roads, but with the increase in electric vehicle purchases, we are missing that market of drivers.
How much does a new car cost today?
The tariffs come shortly after pandemic-era supply chain issues pushed up car prices for U.S. drivers. New vehicle prices are up about 25% since early 2020, according to Kelley Blue Book, with the average transaction price for a new vehicle just above $48,000 as of February.
Meanwhile, higher interest rates have pushed up auto loans, making new-vehicle affordability “a real challenge for most households,” Erin Keating, executive analyst for Cox Automotive, said in a statement earlier this month.
Another report from AAA found the cost the total cost to own and operate a new vehicle was roughly $1,025 per month in 2024, including expenses like maintenance, fuel, insurance, financing and depreciation. That's up more than $200 per month from 2021.
Bailey is a general assignment money reporter for USA TODAY.
Corey Schmidt covers politics and courts for the St. Cloud Times. He can be reached at cschmidt@gannett.com.