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US to Impose 25% Tariff on Imported Vehicles and Key Auto Parts

Automotive

Business Honor
28 March, 2025

US 25% tariff on vehicles and auto parts set to impact operating margins and revenue.

Imported passenger cars (sedans, SUVs, crossovers, minivans, and cargo vans) and light trucks, along with essential auto parts (engines, transmissions, powertrain components, and important electrical parts) will be subject to a 25% tariff according to the Motor Equipment Manufacturers Association (MEMA) of the United States which is the counterpart of the Automotive Component Manufacturers Association of India (ACMA).

The parts tariff date is still pending and will not be later than May 3, 2025, even though the car tariffs will go into force on April 3 at 12:01 a.m. EDT. Additionally, unless a procedure is put in place to apply the 25% tariff solely to the non-US content of those parts, it will not be applied to parts that qualify under the United States–Mexico–Canada Agreement (USMCA).

It was stated that the scope would depend on the list of automotive parts and vehicles to be published in Annex I of the Federal Register in the coming days. The scope is expected to include passenger vehicles (sedans, sport utility vehicles, crossover utility vehicles, minivans, and cargo vans), light trucks, and specific automobile parts (engines and engine parts, transmissions and powertrain parts, and electrical components), according to the connection to Proclamation 9888 (Adjusting Imports of Automobiles and Automobile Parts into the US). The precise affected products (parts) won't be known until the precise list of vehicle components is made public, according to ACMA.

About $5.5 billion worth of engines, engine components, gearboxes, and powertrains are exported by India to the US, whereas only about $1 billion is imported from the US. Given that exports account for a significant portion of the sector's earnings, Indian industry experts caution that the tariffs, which are anticipated to go into effect in May, will reduce operating margins and revenues.