President Trump’s sweeping 25% tariffs on cars and car parts imported into the US are likely to effect classic cars, whether intentionally or not, unless the executive order is amended to exclude them.
The US Customs and Border Protection agency currently applies a 2.5% duty to imported passenger cars, regardless of whether they’re new or classic. Unless specific exemptions are made, it’s likely that the 25% tariff will automatically be added to the 2.5% duty for both new and classic cars.
According to Trump, the new tariffs will come into effect on April 2, with charges on businesses importing vehicles starting the next day. Taxes on parts are set to start in May of this year or later.
The UK’s Historic & Classic Vehicles Alliance (HCVA) issued an immediate statement about the tariffs, with its CEO Dale Keller telling Magneto that: “Historic vehicles and parts are by nature already built, classified and valued and there is no ability to recreate them in the USA. Applying a tariff on these vehicles and parts is therefore an unintended consequence of policy intended for a totally different set of objectives.”
Unfortunately, there’s no similar lobbying organisation in the USA specifically for classic cars but dealers, auction houses and shipping agents are already joining forces. Martin Button, experienced shipping agent and global brand ambassador for CARS, says the hope is that tariffs can be dropped for cars 25 years old or more, which is the ages at which cars not originally manufactured for the American market can be imported.
“We’re hopeful, very hopeful, that they realise that they’ve misunderstood the situation on 25 year-old cars made overseas, and that they’ll rescind it on that,” says Martin. “All of the classics that we bring in attract 2.5% duty, and if it puts it up to 2.5% duty plus a 25% tariff, it’s going to completely kill the market.”
The financial impact of any tariffs will indeed be significant. A car sold for $100,000 would currently be charged $2500 by US Customs and Border Protection but the tariff will add another $25,000, making for $27,250. A £1m car will attract a $275,000 charge. This will certainly slow down the strong flow of cars from the UK and Europe into the US collector car market, affecting private vendors, dealers, auction houses and shipping companies.
Thdere are some exceptions: any car originally manufactured in the US can re-enter the country without tariffs, and any objects – including cars – over 100 years old are classed as ‘antiques’ and should still be able to enter without tariffs being applied.
There’s a chance that classic cars will be made exempt from the tariffs, but the situation is more difficult with new parts for classic cars. Will it be possible to distinguish between new parts for old cars and new parts for new cars? It’s impossible to know at this stage.
The short notice of the executive order also means that there are cars already on the way to the US via shipping companies that will have been bought on the expectation that the import duty will be 2.5% but which are likely to have the extra 25% tariff charged on landing.
What’s likely to happen in some cases is that the imported cars will be switched to a Temporary Import Bond (TIB) for repair or restoration, which lasts for three years – but doesn’t allow the cars to be sold while under that status. If the tariff situation changes, such cars would then probably be shipped over the border into Canada, the TIB cancelled and the cars brought back in on a permanent import basis, paying the appropriate duty.
There are also already UK and European cars assigned for auction at Monterey Car Week in August; it’s probable that at least some will be withdrawn unless the tariff is withdrawn.
The situation could change quickly, and we know that the UK and European governments are all working hard to have the tariffs removed, for the sake of the new car industry, while organisations such as the HCVA are also lobbying on behalf of classic cars. We’ll keep you updated if anything changes.
There’s one other factor worth noting, and that’s that the 2.5% duty that’s been charged by US Customs and Border Protection for many years is significantly lower than that charged by most other countries for imports; most European countries charge 10% plus low-rate VAT. This has long been a source of dissatisfaction for those exporting cars out of the US.
