Walking the talk: New Toyota vehicles are stored at the Toyota Logistics Service in Long Beach, California. Trump’s tariff announcement drew swift condemnation from the European Union. — AP
WASHINGTON: US President Donald Trump has unveiled a 25% tariff on imported cars and light trucks starting next week, widening the global trade war he kicked off upon regaining the White House this year in a move auto industry experts expect will drive up prices and stymie production.
“What we’re going to be doing is a 25% tariff for all cars that are not made in the United States,” Trump said at an event in the Oval Office.
Trump, who sees tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining US industrial base, said the new import taxes will go into effect on April 2, the same date he plans to announce reciprocal tariffs aimed at the countries responsible for the bulk of the United States trade deficit. Collection of the new auto tariffs would begin on April 3.
The announcement drew swift condemnation from the European Union and from Canadian Prime Minister Mark Carney, who called it a “direct attack” on Canadian workers.
“We will defend our workers, we will defend our companies, we will defend our country, and we will defend it together,” Carney said.
Shares of automakers fell in after-hours trading and US equity index futures slid, indicating stocks were headed for a lower open yesterday.
Details of the proclamation Trump signed were still emerging, but their legal basis was a 2019 national security investigation into auto imports that Trump’s first administration conducted, according to a photo of his signed proclamation seen by Reuters.
The proclamation invokes Section 232 of the Trade Act of 1962. The 2019 investigation found that auto imports impair US national security, but at the time Trump did not take action to impose tariffs.
The directive also exempts for now automotive parts that are compliant with the US-Mexico-Canada Agreement (USMCA) on trade that Trump negotiated during his first term.
The agreement allows for largely duty-free trade between the United States and its two largest trading partners.
“USMCA-compliant automobile parts will remain tariff-free until the Secretary of Commerce, in consultation with US Customs and Border Protection (CBP), establishes a process to apply tariffs to their non-US content,” White House principal deputy press secretary Harrison Fields said on X.
The United States imported US$474bil worth of automotive products in 2024, including passenger cars worth US$220bil. Mexico, Japan, South Korea, Canada and Germany, all close US allies, were the biggest suppliers.
Ahead of Trump’s announcement, shares of US-listed automakers fell on concerns that tariffs would send shock waves through a global auto industry that is already reeling from uncertainty caused by Trump’s rapid-fire tariff threats and occasional reversals.
The United States stock market also closed lower on worries over tariffs, which have dogged investors for much of the last month.
The benchmark S&P 500 Index fell 1.1% ahead of the press conference, and is down more than 4% so far in March for its worst monthly performance in nearly a year.
Equity index futures for the S&P 500 were another 0.4% lower on Wednesday evening after the announcement, signalling a weaker start to trading yesterday.
Since taking office on Jan 20, Trump has announced and delayed tariffs on Canada and Mexico for what he alleges is their role in allowing the opioid fentanyl into the US; set import taxes on goods from China for the same reason; launched hefty duties on imports of steel and aluminium; and has repeatedly touted his plans to announce global reciprocal tariffs on April 2.
Regarding the coming April 2 announcement, Trump indicated the measures may not be the like-for-like levies he has been pledging to impose.
“We’re going to make it very lenient,” Trump said. “I think people will be very surprised. It’ll be, in many cases, less than the tariff they’ve been charging for decades.”
The new vehicle levies were expected to drive costs of cars higher for consumers by thousands of dollars, hitting new vehicle sales and resulting in job losses, since the US automotive industry relies heavily on imported parts, according to the Centre for Automotive Research.
“At a time when cost is the number one concern for American car buyers, US automakers are working to provide a range of affordable vehicles for consumers,” Jennifer Safavian, president and CEO of Autos Drive America, a trade group representing foreign automakers, said in a statement.
“The tariffs imposed today will make it more expensive to produce and sell cars in the United States, ultimately leading to higher prices, fewer options for consumers, and fewer manufacturing jobs in the United States.” — Reuters
