President Trump began his term with a massive number of executive orders and proclamations. The executive orders—including new tariffs of 25% on Canada and Mexico and 10% on China—have continued at a regular pace, maintaining pressure on global trade and the automotive industry.

The 25% tariffs on steel and aluminum are due to take effect on March 12, 2025, with no exemptions for countries or sectors. On Feb. 13, 2025, the President also ordered a review of US trade relationships, looking for where there are not ‘reciprocal’ arrangements and promising to make them so.

Trump has indicated there will be further tariffs on cars, semiconductors, and pharmaceuticals. These could be “over and above” potential reciprocal tariffs.

S&P Global Mobility expects that:

• Tariffs could slow global economic growth and damage supply chain relationships between the US and other countries.
• Other countries or trading blocs could respond with retaliatory tariffs, targeted purchase programs or other policy alignments.
• Manufacturers in all industries will be impacted by higher procurement costs for intermediate goods, while tariffs on imported assembled goods will drive inflation.

Although it is not yet certain what tariffs will be enacted, and in what amounts, S&P Global Mobility has developed an early analysis of possible outcomes.

Universal tariffs

Here, we presume a tariff rate of 10% set as a standard/universal/common import tariff on all countries, other than those in the USMCA (unless there is already a tariff rate set higher as a special case trade action, as exemplified by the steel and aluminum tariff). We expect this 10% tariff will apply to most imported manufactured goods, not just automotive.  Though retaliatory tariffs from other countries are likely, we see autos retaliation to be limited.

The macroeconomic impacts of the assumed tariffs resulted in S&P Global Mobility lowering its forecast for global sales by around one million units per year over 2025, 2026 and 2027, with the biggest impact in 2026.

Simple reciprocal or matching tariff

In this scenario, the US would set import tariffs to match those imposed on its exports by each of its major trading partners, establishing tariffs based on trading pairs, including automotive products.

For example, the US would match the EU Common External Tariff (CET) of 10% instead of using the existing 2.5% US passenger vehicle tariff rate. We could see different products from a given country having different tariff rates as well. An announcement is expected in April 2025.

It is also possible that US trading partners head off the US action by offering to reciprocally match the original US import rate. The European Union has stated it would consider lowering its tariff on US autos, for example.

Reciprocal with VAT, Non-Tariff barriers

President Trump is also concerned with non-tariff barriers to exports from the US. To address these, the US could start with the reciprocal tariff-matching scenario but also address non-tariff barriers through an additional top-up tariff. Non-tariff barriers include itemized trade grievances, market access issues or foreign exchange manipulation.

The US could make the case that VAT (value added tax) systems in place throughout most of the world are a form of market distortion. In this scenario, the US could require redress via an additional tariff proportional to the level of VAT applied in the destination country. Note that VAT systems do not directly treat imported goods differently to domestically made goods, however.

If this is the path that the US takes, we would expect tariffs on all trading partners to increase. The hardest-hit regions would be the European Union and Asia.

Presuming this scenario sees tariffs on the automotive sector, without exemptions, annual US vehicle sales could decline between 150,000 and 600,000 units.

Tariffs Impact: Uncertainty and Change for the Automotive Industry

The environment remains fluid. However, the use of tariffs to drastically increase the opportunity for US exports may be relatively limited. Even without trade barriers, US-centric vehicles have other barriers to consumer adoption in many countries.

Further, the uncertainty and chaos are delaying vehicle investment, development and production decisions. The US automotive market could become further fractured from other global markets. For some vehicles facing higher tariffs and exported to the US in low volumes, it may be that leaving a segment or market is a more effective use of capital.

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