Global automakers face approximately $12 billion in costs due to U.S. tariffs, according to the Wall Street Journal report.
Impact of 2025 Tariffs on the Global Automobile Industry
The imposition of tariffs on imported cars and car parts in 2025 has significantly affected the financial performance of global automakers in the U.S. market. Major automakers such as General Motors, Ford, Toyota, Nissan, Hyundai, Volkswagen, and European luxury brands have all reported substantial tariff-related expenses.
Key financial impacts include billions in tariff costs. GM absorbed $1.1 billion in Q2 alone, expecting a $4–5 billion total impact in 2025; Ford cited $800 million in Q2 tariffs, with an expected $3 billion impact for the year. Imports from Korea, the EU, and Mexico have each contributed billions in additional costs, with roughly $4,000 to $8,500 added per imported vehicle depending on origin.
The tariffs have also resulted in reduced profitability. Toyota’s net income fell by $3.3 billion year-over-year in Q2 despite rising sales. Volkswagen’s Q2 operating profit dropped nearly 30%, leading to lowered full-year profit margin and cash flow outlooks. Overall, many OEMs revised downward full-year forecasts due to tariffs and other factors like weakening EV demand.
Automakers are largely passing tariff costs to consumers, leading to average vehicle price increases of about $1,760 to over $2,000 per car. This contributed to lowered U.S. vehicle sales forecasts by roughly one million units over three years. Mitsubishi raised prices by 2.1% citing tariffs. Price hikes are particularly notable for luxury European brands relying on imports.
The tariffs have disrupted the traditional "build-in-Mexico" business model, adding $8.6 billion in extra costs and challenging supply chains. Margins in North American auto parts manufacturing are said to be compressed well below sustainable levels under 25% tariff scenarios, threatening production continuity.
The tariffs have also had broader competitive effects. Combined with the rollback of U.S. EV incentives, they have hindered the U.S. auto industry's competitiveness in the growing EV market, with forecasts lowering battery electric vehicle sales shares substantially. American automakers may become reliant on foreign EV technology as a result.
Reciprocal tariffs were initially set to take effect on April 9, 2025, but were delayed by 90 days to allow for the negotiation of trade agreements with certain countries. On April 2, 2025, U.S. President Donald Trump announced the imposition of tariffs on products from 185 countries and territories. The World Trade Organization has expressed concerns about the potential impact of these tariffs on global trade and economic growth.
According to the Wall Street Journal, losses in the automobile industry are expected to continue, with the net profit of 10 major automakers, excluding Chinese conglomerates, expected to decrease by approximately a quarter by the end of the year. The ongoing impact of these tariffs underscores the need for continued dialogue and negotiation to find a solution that supports both domestic industries and global trade.
[1] General Motors Q2 2025 Earnings Call Transcript. (2025). Seeking Alpha. [2] Toyota Q2 2025 Earnings Report. (2025). Toyota Motor Corporation. [3] Ford Q2 2025 Earnings Report. (2025). Ford Motor Company. [4] Hyundai-Kia Q2 2025 Earnings Report. (2025). Hyundai Motor Group. [5] Volkswagen Q2 2025 Earnings Report. (2025). Volkswagen AG.
- Despite the financial strain from the tariffs, automakers like General Motors, Ford, Toyota, and Volkswagen have not halted their manufacturing operations, instead, they've started exploring the possibilities of domestic sports car production to reduced reliance on imported parts.
- In an attempt to compete with the rising cost of sports cars due to tariffs, some automakers have begun investigating the manufacturing processes of sports cars and components to find ways to decrease production costs and maintain competitive pricing.
