More Tariffs on Automobiles, Semiconductors and Pharmaceuticals?

We have gotten several questions over the last couple of weeks about new tariffs for April 4 covering automobiles, electronics and pharmaceuticals. So what's going on here? Let's unpack this latest threat from the Trump administration to trade.

First, there has been no executive order signed nor any action other than words at this point. That's not to say the tomorrow or next week or next month there won't be, but as of the writing of this post, there is no tariff increase on the above products. HOWEVER, the proposal is an extra 25% tariff rate on automobiles from foreign manufacturers and "25% or higher" for semiconductor and pharmaceuticals from foreign sources. President Trump says that the tariffs on cars will come as early as April 2, the day after he receives information from his cabinet on their recommendations for reshaping global trade. It is likely that something is definitely coming in the next month on automobiles.

But what about semiconductors and pharmaceuticals? It's much more nebulous here. It is likely that we'll have to wait a few months to figure out what's going on with these products. Mr. Trump has indicated that 25% will be the base for pharmaceuticals and semiconductors but that they could be higher once announced or could start at 25 and gradually increase over time to an undisclosed rate. Mr. Trump has stated that he wants to give US companies time to establish manufacturing facilities in the US before he imposes such a high tariff on their products. So for now, imports of these items will remain business as usual, though it is unclear how much time will be given to US companies to build their factories since it's generally not something that can be accomplished in a few months.

Hopefully we won't need to worry about extra tariffs on chips and pharmaceuticals for the next 6 months to a year, but one never knows. As for car imports... expect something in the coming weeks to make the higher tariff official. What is unclear is if it really will be 25% across the board (meaning all passenger vehicles) or if there will be exceptions or even something with variable rates based on the type of car, truck or van. We'll keep this post updated as we know more.

UPDATE: While there has been no official word on pharmaceuticals or semiconductors yet, automobiles and automobile parts are set to increase tariff rates to 25% on April 3. There is a lot of consternation in Canadian, Mexican and European circles and there are negotiations likely taking place as I write. The Trump administration has signaled openness to making "deals" but has also signaled that they will not work and even seek to punish those who retaliate against tariffs.