Maryland Senate President Bill Ferguson said Friday his chamber plans to reduce a proposed increase on the state’s sales tax on vehicles after President Donald Trump announced he’d levy a 25% tariff on imported vehicles and auto parts.

The swift pivot marks yet another Trump-induced change in course for lawmakers navigating a tough budget squeeze.

Maryland lawmakers were moving their budget through the legislative process when Trump’s announcement landed this week. The House of Delegates had passed a version of the budget containing a 6.8% excise tax on vehicle sales, up from 6%. It estimated the tax would add $140 million to the more than $1 billion in taxes currently collected from vehicle sales, according to the transportation department.

But Ferguson said budget leaders in his chamber are considering dropping that proposed increase in response to Trump’s “draconian” proposal — by as much as half a percentage point from where the House landed.

The Democrat from Baltimore said it seems “crazy” to put a 25% tax on cross-border economic activity on a car industry that has benefited from innovative advances of international trade. He said it’s “an ideological evangelical approach that is not good for anybody.”

Ferguson highlighted the importance of the car industry to the Port of Baltimore, one of the state’s key economic drivers, and said the state will likely see a drop in economic activity “at the worst possible time.”

Baltimore handled the second-most cars and light trucks of any U.S. port in 2024 — about 750,000, and approximately 641,000 of those were imports, according to the transportation department.

Ferguson marveled at the “consternation” in the General Assembly over what he described as modest tax increases when the president is proposing such a large hike that will likely be passed on to consumers.

“I’m not sure anybody in the country voted to say: ‘I would like to make cars more expensive,‘” he said.

During budget debates in the House of Delegates, Republicans railed against the majority of tax increases proposed by Gov. Wes Moore and backed by Democratic leaders, proposing several dozen amendments, including not raising the excise tax on new and used car sales. All of them failed.

House minority leader Jason Buckel, a Republican from Allegany County, said he’s not an expert on the impacts of federal policy but doesn’t support tariffs raising prices on consumers during challenging economic times for Marylanders. He also contested Democrats’ motivations for changing course.

“I don’t think everything they are doing is because of Trump,” he said. “It’s convenient. It’s politics. But the truth of the matter is we’ve made most of our problems.”

Sen. Stephen Hershey, minority leader, called out Democratic proposals to raise registration fees, tie the gas tax to inflation and now add a $5 per tire tax on top of the $1 tire recycling tax, also tied to inflation.

“There is no one making vehicle ownership more expensive than Maryland Democrats,” the Eastern Shore Republican said.

Here’s what else to know about how tariffs and state taxes could affect the price of cars:

Why are these two price increases happening at the same time?

Maryland lawmakers have been haggling over how to patch a $3.3 billion budget gap. This conversation has been happening for months.

They’ve decided to make cuts and increase some taxes. Raising the tax on a car purchase is just one of their revenue-boosting tools. Lawmakers plan to finalize the rate in the coming days.

In D.C., and at the same time, the president announced he’ll tax vehicles made in other countries and some foreign-made car parts.

This will likely mean a double whammy for some car buyers.

How do tariffs make the sales price of cars go up?

Automobile dealers in Maryland had been prepared for the potential tariffs, but the White House’s announcement legitimized their concerns.

Peter Kitzmiller, president of the Maryland Automobile Dealers Association, said in an interview Thursday those costs will be passed to car buyers. The average cost of a new car in the U.S. has risen to nearly $50,000. Kitzmiller said a 25% tariff will only increase that.

Thousands of dollars more on a car purchase will “price a lot of people” out of the market, said Kitzmiller, who has led the trade association for 26 years.

”It’s gonna impact sales,” he said. “It just is.”

And Marylanders like foreign cars. According to an analysis by Insurify, an insurance research website that helps consumers shop for the best rates, 58% of cars bought in Maryland in 2022 were foreign made. The top picks: Hondas.

How does the car excise tax factor in?

A car excise tax is paid on the sticker price. If the price of a $50,000 car goes up 25% because of the tariff, that could add $12,500 to the price of a car.

That inherently increases excise tax revenue and would have even if the state kept the rate at 6%.

But if the state’s final budget adds a marginal bump, it will add potentially hundreds of dollars more, depending on the car’s sticker price. The higher excise tax rate would also apply when new Maryland residents register their cars for the first time.

Will Trump’s tariffs derail Maryland’s revenue-boosting move?

Maryland lawmakers looking to raise revenues proposed raising the car excise tax to help close the state’s budget gap.

Alessandro Rebucci is an international economics and finance professor at the Johns Hopkins University Carey Business School. He said the state’s excise tax increase on its own might not have deterred car buyers, but a 25% swing in the sticker price might.

“There is a general principle in economics,” Rebucci said, “that consumers react more to big changes than small changes.”

Trump’s sizable tariffs, the larger burden of the two, could undercut Maryland’s car tax increase simply because they’re happening at the same time, Rebucci said.

The tariffs could mean thousands of dollars added to the sticker price of a car, making the choice between buying a new car and repairing an old one a no-brainer.

Conservative economist Art Laffer, known as “the father of supply-side economics,” said in a report that Trump’s auto tariffs would hurt the industry ecosystem unless the president made some of his exemptions permanent.

Will I still pay a tariff if I buy an American car?

Trump said he’s not going to put a tariff on cars built in the U.S. But manufacturing costs for those companies buying parts from other countries, such as China, Canada and Mexico, may go up.

But the president told reporters Wednesday that prices will go down because the tariffs will incentivize companies to build in America. He also said the move will “spur growth.”

Then there are insurance payments

Even before the auto industry tariffs, the Trump administration proposed tariffs on imports from Canada and Mexico, major importers of car parts. These tariffs announced in February already threatened to make car insurance rates go up more than predicted, according to a report from Insurify.

In Maryland, insurance rates were expected to rise 5%. The Canada-Mexico tariffs bumped that up to 8%.

Why is the president doing this?

Trump campaigned on reviving American manufacturing, and part of those plans included enticing foreign companies to build plants in the U.S. Tariffs are part of that plan.

“We’re going to charge countries for doing business in our country and taking our jobs and taking our wealth,” Trump said Wednesday, speaking to reporters in the Oval Office about his car tariffs.

The White House expects the tariffs will yield $100 billion in annual revenues, according to a press pool report.

Trump’s auto industry tariffs start Thursday.

Hayes Gardner contributed to this report.