Trump announces 25% tariffs on foreign cars

US President Donald Trump has announced steep tariffs on auto imports and parts, provoking threats of retaliation from trading partners ahead of further promised trade levies next week.

Wall Street slumped ahead of Trump’s Wednesday afternoon announcement, while the world’s top-selling automaker Toyota plunged more than three per cent.

Japan’s Prime Minister Shigeru Ishiba said Tokyo was “considering all kinds of countermeasures”, while Canada’s Mark Carney branded Trump’s tariffs a “direct attack” on his country’s workers.

Brazil’s President Luiz Inacio Lula da Silva also said his country “cannot stand still” in response to the levies.

“What we’re going to be doing is a 25 per cent tariff on all cars that are not made in the United States,” Trump said, as he signed the order in the Oval Office.

The duties take effect at 12:01am (0401 GMT) on April 3 and impact foreign-made cars and light trucks. Key automobile parts will also be hit within the month.

Newly manufactured cars of the automobile maker Subaru awaiting export are parked at a port in Yokohama, south of Tokyo, Japan.
File/Reuters

Trump responded by threatening Canada and the European Union with “large scale tariffs, far larger than currently planned” if they work together to cause “economic harm” to the United States.

‘Foreign trade cheaters’

Peter Navarro, Trump’s senior counsellor for trade and manufacturing, in a briefing after Trump’s announcement, blasted “foreign trade cheaters” who he said turned America’s manufacturing sector into a “lower wage assembly operation for foreign parts.”

He took aim at Germany and Japan for reserving the construction of higher-value parts to their countries.

But Washington’s levies appeared to raise eyebrows close to home, including from Trump ally and Tesla boss Elon Musk, who said the cost impact on his firm’s cars was “not trivial”.

“To be clear, this will affect the price of parts in Tesla cars that come from other countries. The cost impact is not trivial,” he posted on X.

The association of American Automakers said in a statement on Wednesday that Trump’s tariffs must be implemented in a way that “avoids raising prices for consumers” and preserves the industry’s competitiveness.

Since beginning his second term in January, Trump has imposed fresh tariffs on imports from major US trading partners Canada, Mexico and China – alongside a 25 per cent duty on steel and aluminium.

The latest levies will be in addition to those already in place for products.

But the White House added that vehicles entering under the US-Mexico-Canada Agreement (USMCA) can qualify for a lower rate depending on their American content.

Similarly, USMCA-compliant auto parts will remain tariff-free as officials establish a process to target their non-US content.

‘Devastating impact’

Uncertainty over Trump’s trade plans and worries they could trigger a downturn have roiled financial markets, with consumer confidence also falling in recent months.

A drone view shows the General Motors plant, which exports vehicles to Canada and the US, in Ramos Arizpe, Mexico.
File/Reuters

Shares in General Motors and Stellantis were each down more than three per cent ahead of Trump’s announcement.

In Japan, carmakers Nissan lost 2.5 per cent, Honda shed 3.1 per cent and Mitsubishi Motors gave up 4.5 per cent, while Mazda and Subaru both gave up around six per cent.

South Korea’s Hyundai retreated 2.7 per cent in Seoul.

Trump has defended the levies as a way to raise government revenue and revitalise American industry.

Straining relations with other nations likely

But targeting imported cars could strain ties with close partners such as Japan, South Korea, Canada, Mexico and Germany.

“Imposing 25 per cent tariffs on imported cars will have a devastating impact on many of our close trading partners,” said Wendy Cutler, vice president at the Asia Society Policy Institute and a former US trade negotiator.

She added that Washington has free-trade agreements with some affected parties, “calling into question the value of US commitments” under a trade deal.

About 50 per cent of cars sold in the United States are manufactured within the country. Among imports, about half come from Mexico and Canada, with Japan, South Korea and Germany also being major suppliers.

And of the US-made cars, more than half were assembled from foreign parts, said a White House official.

The American Automotive Policy Council representing Detroit’s “Big Three” automakers – Ford, General Motors and Stellantis – issued a carefully worded statement on the tariffs, saying it hoped the policy would boost US auto production.

But it stressed: “It is critical that tariffs are implemented in a way that avoids raising prices for consumers.”

The Center for Automotive Research has previously estimated that US tariffs – including those on metals and imported autos – could increase the price of a car by thousands of dollars and weigh on the jobs market.

‘Liberation Day’

Besides the automobile industry, Trump is also eyeing sector-specific tariffs, such as on pharmaceuticals, semiconductors and lumber.

Wednesday’s announcement comes ahead of Trump’s so-called “Liberation Day” for the world’s biggest economy on April 2.

He has promised reciprocal levies, tailored to different trading partners to remedy practices Washington deemed unfair. On Wednesday he said these duties will impact all countries.

While Trump has invoked emergency economic powers for some recent tariffs, his auto levies build on a government investigation completed in 2019.

The probe found that excessive imports were weakening the internal economy and might impair national security.