At midnight, President Trump enacted a promised 25% tariff on all steel and aluminum imported into the United States. Steel and aluminum make up much of every car, so the move is likely to raise the cost of the average new car.
The New York Times says the move could “cause steel prices in the United States to rise about 16% compared to prices in 2024, according to the research firm Wolfe Research.”
The duties apply to steel and aluminum imported as raw materials. They also raise the cost of certain finished parts. Industry publication Automotive News explains, “Duties also apply to certain ‘derivative’ products that contain steel and aluminum sourced from other countries. That list includes aluminum bumpers, hinges, steel lug nuts, and certain other parts imported by the auto industry.”
Most Steel Is Domestic
The move is just one of at least four rounds of tariffs that each could raise car prices. Steel and aluminum tariffs may affect window stickers the least of the four. Car factories in America use more domestic than imported steel and aluminum.
The American Iron and Steel Institute estimates that last month, just 21% of the steel used in American manufacturing was imported.
Three Other Rounds of Tariffs Likely
The most significant of the four possible rounds of tariffs is a promised 25% levy on all products imported from Canada and Mexico. President Trump has now delayed the implementation of that round of tariffs twice. It is currently set to begin in early April.
Some analysts predict that plan could increase the cost of the average midsize SUV by as much as $9,000.
Other possible tariffs include a set of levies specific to the auto industry that could begin on April 2. Promised “reciprocal tariffs” against countries that tariff American cars could start at any time.
One tariff could multiply the effect of another. Automotive News notes, “The White House has said tariffs on steel and aluminum would stack on top of those for all Canadian imports. That means steel and aluminum from Canada could soon be taxed at 50%.”
Automakers Were Concerned About Steel Prices Before This
Car companies were already facing high steel prices before the tariffs began.
The New York Times explains, “In the United States, U.S. Steel and Cleveland-Cliffs are the only major American producers of the high-finish steel favored by automakers.”
U.S. Steel has struggled and sought a buyer in recent months.
“Cleveland-Cliffs has long sought to acquire its rival, but such a merger has raised concerns in the auto industry that it could create a monopoly, giving the combined company the power to raise prices.”
Automakers cheered a bid by Japan’s Nippon Steel to buy the company, which would prevent a monopoly on domestic steel. However, former President Biden blocked the acquisition due to concerns about foreign ownership in a critical industry.
Trump has kept Biden’s policy, insisting “that U.S. Steel must remain American-owned.”