What Every Auto-Sector Company Should Know About … the New Automotive Tariffs

On April 3, 2025, President Trump issued the full details of the automotive tariffs, including the exact Harmonized Tariff Schedule (HTS) subheadings to which the automotive tariffs apply. This completed the implementation of the automotive tariffs, first announced on March 26, 2025, which established comprehensive 25% tariffs on imported automobiles (sedans, sport utility vehicles, crossover vehicles, minivans, and cargo vans) as well as light trucks. A review of the subheadings contained in the newly announced Annex to the proclamation shows that it also covers over 150 auto parts categories, including most of the parts and components used in automobile production. The Annex includes tariff codes for electrical automotive parts, engines, transmissions, power trains, lithium-ion batteries, and other major components, along with commonly imported parts such as tires, shock absorbers, and brake hoses.

These tariffs took effect on April 3, 2025 for completed automobiles; for automobile parts, the tariffs will start collection on May 3, 2025 (with a carveout for USMCA-certified parts, which will be exempt until a collection mechanism is finalized). The one-month delay is intended to give the U.S. government time to work out rules to exempt the value of automotive parts that contains U.S.-made materials, which will not be subject to the tariffs.

These new automotive tariffs are not occurring in a vacuum. Indeed, they come at the same time as the implementation of expanded 25% Section 232 duties on steel and aluminum (which are widely used in automobiles); global and reciprocal tariffs on nearly all countries worldwide of between 10% and 49% (since paused for 90-days, but still applied at 10%); additional China-specific tariffs of 145% (on top of early Section 301 tariffs of up to 25%, thus implementing tariffs starting at to 170% for China); and 25% duties on Canada and Mexico (partially suspended for USMCA-compliant goods). Although the automotive tariffs are specifically exempted from the global and reciprocal tariff measures, in all other cases the duties “stack,” adding to the cumulative financial burden on importers.

The net result is a massive increase in tariffs for automotive goods imported into the United States, which will have a major impact on the entire automotive sector, which is an industry dependent on a complex international supply chain. To help automotive companies understand the impact of these tariffs, we are presenting a summary of the current status of the tariffs, as well as Frequently Asked Questions that we are receiving from various clients.

Automotive Tariffs: What We Know So Far

As a starting point, it is important to understand how the automotive tariffs fit into the overall tariff structure that has grown up over the last two months. Here are the groupings of tariff announcements to understand the context of tariffs:

• Chapter 1-97 Pre-Existing Tariffs: These are the tariffs that have existed for decades, generally in the range of 0%–7%. These tariffs continue to apply, as all tariffs “stack” on top of the normal tariffs.
• Section 301 Tariffs: These tariffs were imposed just on Chinese-origin goods in the first Trump administration. About half of trade with China is exempt from these tariffs (the so-called “List 4B”); the other half of imports from China pay a tariff of between 7.5% and 25%. These tariffs lasted through the Biden administration and stack on top of the Chapter 1-97 tariffs for China alone.
• Section 232 Sectoral Tariffs: The third set of tariffs are the sectoral tariffs imposed under Section 232 on specific products. These sectoral tariffs fall into three buckets:
  • First, there are 25% tariffs imposed on steel and aluminum, payable on products from anywhere in the world. The tariffs extend to certain identified steel and aluminum derivative products (i.e., products in identified Harmonized Tariff Schedule (HTS) subheadings that contain a lot of steel or aluminum). The only carveout here is for products that use steel and aluminum that are “melted and poured” or “smelted and cast” within the United States. For derivative products, only the value of the steel or aluminum is subject to the additional 25% tariff.
  • Second, there is a 25% tariff imposed on automobiles and most automotive parts. For the automotive tariffs, there currently is a pause in their implementation for parts and components that are USMCA-compliant. By May 3, 2025, the Department of Commerce will establish a system to calculate non-U.S. content, which will be subject to the 25% tariff rate for both automobiles and automotive parts.
  • Third, certain sectors will be subject to forthcoming sectoral tariffs. The U.S. government already has initiated investigations into copper and lumber. President Trump has indicated there is a strong likelihood that the same will occur for semiconductors and pharmaceutical products.

• IEEPA 25% Canada and Mexico Tariffs: The fourth set of tariffs are the 25% tariffs imposed on Canada and Mexico relating to what President Trump characterizes as their role in not exerting sufficient efforts to halt the flow of fentanyl and unauthorized immigrants int to the United States. These tariffs are suspended for any goods that are USMCA-compliant.
• IEEPA 20% China Tariffs: This fifth set of 20% tariffs is related to what President Trump characterizes as the Chinese government’s failure to halt the shipment of fentanyl precursors into the United States.
• IEEPA Global and Reciprocal Tariffs: The final set is the largest set of tariffs by far, which include (1) 10% global tariffs imposed on the entire world and (2) reciprocal tariffs, which are calculated based mostly on the level of the trade deficit with each country. The calculated ranges for these tariffs go from 10% (countries subject only to the global tariffs, like Singapore and the United Kingdom), up to 49%. Due to the Trump administration’s response to China’s retaliatory tariff, the current level of these tariffs against China is 125%, which when combined with the IEEPA 20% tariffs gives China a net increase of 145%, over and above pre-existing Section 301 tariffs that were imposed in the first Trump administration.

Importantly, although the reciprocal tariffs are currently paused for 90 days, this pause does not impact the automotive tariffs, which remain in place. This new round of automotive tariffs isn’t based on fresh findings; instead, as a way to implement these tariffs quickly, the Trump administration is leaning on the Section 232 auto-sector investigation and report produced during President Trump’s first term. While that investigation concluded that automotive imports were “weakening our internal economy” and posed a threat to national security, President Trump directed the USTR to pursue trade deals to mitigate the threat rather than imposing tariffs. Now, in his second administration, President Trump is carrying through on the tariffs that he did not impose in his first administration.

Here’s how the new tariff regime is structured:

• 25% tariffs apply to automobiles and automotive parts listed in Annex A to the Federal Register order.
• USMCA-eligible automobiles and automotive parts qualify for a reduced tariff, as the tariff only applies to non-U.S. content. Importers may submit documentation to the Commerce Department detailing the value of U.S. content, which is defined as parts that are wholly obtained, entirely produced, or substantially transformed in the United States. The 25% tariff applies only to what remains (i.e., the non-U.S. portion).
• USMCA-eligible parts are not subject to the new tariffs until a method is established (by Commerce and CBP) for applying the duty to the non-U.S. content value. This mechanism must be in place by May 3, 2025. Thus, tariffs on USMCA-eligible parts are currently set to zero.
• Knock-down kits and parts compilations are excluded from the tariff.
• The 90-day pause will allow domestic producers and industry groups to petition the Commerce Department to include additional auto parts under the tariff regime, citing rising import levels and national security concerns. Commerce will create a process within 90 days for domestic automakers or industry groups to request that additional auto parts be brought under the tariff umbrella, where there is an argument that rising import levels pose a threat to national security.
• Any autos or parts entering foreign-trade zones (FTZs) on or after April 3, 2025, must enter under privileged foreign status unless eligible as domestic status. This locks in the dutiable classification of the goods in the form in which they were imported. In effect, this means that any such products would have to pay any automotive duties even if processed into a different good in the FTZ.
• Consistent with the other special tariffs imposed during the current Trump administration, no duty drawback will be available for the automotive tariffs.
• Customs and Border Protection (CBP) is directed to closely monitor U.S. content claims closely. If CBP determines that an importer has overstated the U.S. content, the full 25% tariff will apply to the entire value of the vehicle or part model, retroactive to April 3, 2025, and prospectively, until the issue is resolved and verified.
• The proclamation does not include any information on treatment of goods in transit, goods imported using Temporary Importation under Bond (TIB), or the impact or application of temporary duty exemptions. The Department of Commerce and/or CBP may likely issue additional implementing instructions to cover these gaps.

Although coverage of the automotive proclamation extended to automotive parts, it was not until April 2, 2025, that the critical Annex listing the automotive was released, along with CBP guidance regarding the fully assembled automobile provisions. The Annex provides three new elements to the Presidential Proclamation:

• The Annex expands the list of automobiles and automobile parts that fall within the scope of the automotive tariffs.
• The Annex confirms the USMCA exemption for parts until a process is finalized for applying the tariff to non-U.S. content.
• The Annex confirms the Section 232 automobile and automobile parts tariffs do not stack with the global and reciprocal tariffs.

The list of automobiles covered is all inclusive, and covers automobiles falling within the following HTS subheadings:

• 8703.22.01
• 8703.23.01
• 8703.24.01
• 8703.31.01
• 8703.32.01
• 8703.33.01
• 8703.40.00
• 8703.50.00
• 8703.60.00
• 8703.70.00
• 8703.80.00
• 8703.90.01
• 8704.21.01
• 8704.31.01
• 8704.41.00
• 8704.51.00
• 8704.60.00

To accommodate the additional duties, new Chapter 99 subheadings have been introduced in the HTS for different classifications of vehicles and parts, including passenger vehicles and light trucks from all countries:

• The HTS is expanded to include a new Chapter 99 subheading of 9903.94.01 for all entries of passenger vehicles (sedans, sport utility vehicles, crossover utility vehicles, minivans, and cargo vans) and light trucks from all countries.
• A new Chapter 99 subheading of 9903.94.02 is established for all entries covered in the above codes that are not passenger vehicles or light trucks, or where the “U.S. content” of passenger cars and light trucks are exempt from tariffs eligible for preferential treatment under the USMCA. Use of this second subheading requires prior approval by the Secretary of Commerce to take advantage of the preferential tariff treatment.
• A new Chapter 99 subheading of 9903.94.03 applies 25% tariffs to the non-U.S. content for USMCA-certified passenger vehicles and light trucks.
• A new duty-free Chapter 99 subheading of 9903.94.04 is created for exempt passenger vehicles and light trucks manufactured “at least 25 years prior to the year of the date of entry from the tariffs.”

The list of automotive parts and components also is very broad, basically covering nearly all automotive parts and components, covering HTS subheadings under Chapters 40, 70, 73, 83, 84, 85, 87, 90 and 94. Entries subject to these automotive tariffs are to be filed under new Chapter 99 subheading 9903.94.05. Importers should use subheading 9903.94.06 for all entries of articles classifiable under these HTSUS subheadings that (i) are eligible for special tariff treatment under the USMCA (other than automobile knock-down kits or parts compilations) or (ii) are not parts of passenger vehicles and light trucks. While USMCA-certified passenger vehicles and light trucks remain in the scope of the new automotive tariffs for non-U.S. content, USMCA-certified automobile parts receive a full exemption from the scope of the tariffs. The full list of HTS subheadings is found in the published Annex.

It can be difficult to parse how the various tariffs work together, as well as when they take effect. To aid importers in understanding these two issues, a summary of the operation of the tariffs is as follows. In each case, the “total duty amount” assumes that the normal Chapter 1-97 tariffs (i.e., tariffs existing before President Trump took office) are at the 2.5% standard duty rate.

Automotive Tariffs: Open Questions

The one thing that is clear is the automotive tariffs are not impacted by the 90-day pause; they are moving ahead along the schedule announced in the original automotive tariff proclamation. Beyond that, just as is true with the other new tariffs, the automotive tariffs leave a lot of open questions, including the following:

• The auto parts tariffs begin on May 3, 2025, but USMCA-compliant parts are exempt until the Secretary of Commerce, in consultation with CBP, establishes a process to apply tariffs to non-U.S. content. Will the calculation of the U.S.-origin content for partial tariff relief use the USMCA rules of origin or establish a new set of calculations?
• What type of documentation will importers need to provide to support the U.S.-origin calculation? Will it involve a certification process like the USMCA regional content calculations?
• How is the U.S.-origin content to be calculated when goods cross the border multiple times?
• The Federal Register notices states companies or importers will need to submit documentation directly to the Secretary of Commerce that identifies the amount of U.S. content in each vehicle for approval. How will this process work? How quickly will that review take given the large number of applications that are likely to flood in from automotive companies?
• The Annex covers automotive computers that fall under the four-digit heading associated with general computer products such as laptop computers. How will this tariff be implemented for automotive computers, when there is no separate code for “automotive” computers?
• The proclamation directs the Commerce Department to establish a process within 90 days for domestic producers to request that other parts imported be targeted. How will this process work?
• Will importers have to apply both the substantial transformation test and the USMCA rules to demonstrate compliance? That dual-track approach of applying both rules regarding imports from Canada and Mexico already has arisen for Section 301 duties, as importers have had to apply USMCA rules for Chapter 1-97 tariffs and marking requirements, while applying substantial transformation rules to determine the country of origin for purposes of Section 301 tariffs. A similar outcome could occur here.
• Will negotiations by other countries impact the scope of the automotive tariffs? How will such changes be reflected in the automotive tariffs?
• What will happen at the end of the 90-day reciprocal tariff pause?

Customs has been issuing new Cargo System Message Service messages to give updates to the importing community regarding how to handle import-related issues flowing out of the new tariffs. We expect the same to happen with the new automotive tariffs. We will continue to update our tariff FAQs to provide timely answers as new information becomes available.

The Foley International Government Enforcement Defense & Investigations Team is monitoring all tariff-related developments, including any modifications, clarifications/guidance, or additional measures introduced by the Trump administration, which we are posting as they occur on our Tariff & International Trade Resources blog. As new information becomes available, we will provide updates and analysis to help importers navigate the evolving international trade paradigm, including for new tariffs.

Our white paper on “Managing Import and Tariff Risks During a Trade War” outlines a 12-step plan to provide practical steps to help importers navigate the tariff and international trade risks in the current tariff and trade environment, while the companion white paper on “Managing Supply Chain Integrity Risks” provides practical advice to deal with heightened supply chain risks pertaining to goods imported into the United States, including the increasing use of detentions by Customs.

If you have questions about this post, please feel free to reach out to any of the authors or your Foley & Lardner attorney. If you would like to see future updates regarding “What Every Multinational Company Needs to Know” about operating in today’s complicated international trade world, please sign up for our Tariff & International Trade blog — click here to register.