Trump's Tariff Threats Sends This Industry Into A $100 Billion Bind

Auto manufacturers may be facing a manufacturing dilemma as President Donald Trump‘s proposed tariffs threaten to upend global production strategies, potentially reshaping an industry that imported roughly half of the 16 million vehicles sold in the U.S. last year.

Trump warned Tuesday that sector-specific tariffs could reach “in the neighborhood of 25%” and might increase over time, according to The Wall Street Journal. The president suggested a grace period would allow companies to relocate production to the U.S.

“Things keep changing minute by minute, but our stance is to stay flexible and be able to be agile in reacting to the situation,” Shinji Aoyama, Honda HMC Executive Vice President, said.

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Asian and European automakers face particular exposure. Japanese manufacturers Toyota TM, Honda and Nissan rely heavily on American consumers, with the U.S. market accounting for 25% of Toyota’s global sales, nearly 40% of Honda’s, and a steep portion of Nissan’s business.

South Korean manufacturers Hyundai and Kia, which have grown rapidly in the American market, remain more dependent on imports than their Japanese counterparts despite expanding U.S. production capacity.

For German automakers, American sales represent an opportunity amid Europe’s regulatory challenges and China’s increasingly competitive market. Premium brands face the greatest vulnerability—Ferrari RACE and Porsche sold roughly 25% of their vehicles to American buyers last year, all imported from Europe.

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Mercedes-Benz and BMW operate manufacturing facilities in Alabama and South Carolina respectively, but their production strategies are complex. The plants produce SUVs for global export while the companies continue importing sedans from European factories.

“It really depends on the amount of tariffs first of all,” Volvo Cars Chief Executive Jim Rowan told The Journal, saying the company has capacity to increase production at its South Carolina factory but must weigh tariff costs against U.S. production expenses.

The White House has specifically targeted what it calls “lack of reciprocity” in trade relationships, pointing to the European Union’s 10% tariff on imported vehicles compared to America’s 2.5% equivalent fee.

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Trump has expanded the critique to include value-added taxes, writing on X that the taxes are “far more punitive” than tariffs and would factor into reciprocal tariff calculations. European countries typically apply VAT at rates of 20% or higher on vehicle sales.

Detroit’s “Big Three” manufacturers—General Motors GM, Ford Motor F and Stellantis STLA—have been lobbying intensively to minimize North American trade barriers, as their supply chains depend on cross-border component movement.

Tariffs targeting Mexico and Canada remain on hold until March, according to The Journal, while federal agencies are due to deliver implementation reports for reciprocal tariffs in early April.

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