Trump hits auto imports with 25 per cent tariff starting next week

27/03/2025 05:40 AST

President Donald Trump signed a proclamation to implement a 25 per cent tariff on auto imports, expanding a trade war designed to bring more manufacturing jobs to the US and setting the stage for an even broader push on levies next week.

"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 at the White House on Wednesday. "We're going to charge countries for doing business in our country and taking our jobs, taking our wealth, taking a lot of things that they've been taking over the years."

The president said the tariffs would go into effect on April 2 and that the US would start to collect them a day later. The White House said the tariff would apply not only to fully assembled cars but key automobile parts, including engines, transmissions, powertrain parts and electrical components. That list could expand over time to encompass additional parts.

Trump cast the tariffs as "permanent" and said he was not interested in negotiating any exceptions. Shares of General Motors Co., Ford Motor Co. and Stellantis NV dropped in after-hours trading as Trump spoke. Asian carmakers declined, led by Toyota Motor Corp., in early trade Thursday.

The White House in a fact sheet said importers whose vehicles were covered by USMCA, the trade agreement negotiated in Trump's first term with Canada and Mexico, would be "given the opportunity to certify their U.S. content and systems will be implemented such that the 25 per cent tariff will only apply to the value of their non-U.S. content."

The tariffs will be on top of levies already in place, White House Staff Secretary Will Scharf said, and the administration projects that the tariffs would result in $100 billion of new annual revenue to the US.

A White House official, discussing the tariffs on the condition of anonymity, said the administration would develop a plan to deal with parts that cross the border multiple times.

Wednesday's move comes ahead of an even broader announcement of so-called reciprocal tariffs expected April 2 - a bid to drive down other countries' barriers and shrink US trade deficits. Those tariffs will see the US apply rates on a country-by-country basis to counter barriers levied on American imports. Trump, though, has signaled some trading partners may receive possible exemptions or reductions in duties.

Other industry-specific tariffs are also in the works, with Trump threatening levies on lumber, semiconductors and pharmaceutical drugs.

"That's the real Liberation Day of America, and that's going to be on April 2, and I look forward to it," Trump said Wednesday.

The auto levies mark a significant expansion of the president's trade fight, and likely ensnare some of the biggest automotive brands in countries including Japan, Germany and South Korea, all major US trading partners. The move risks disrupting operations for North American automakers, which rely on highly integrated chains across the US, Mexico and Canada.

Still, the tariffs will hit the non-US content in some of Detroit's most recognizable and profitable models. GM imports some Chevrolet Silverado pickup trucks from plants in Mexico and Canada, while Stellantis makes models including the Jeep Compass SUV in Mexico.

Ford produces a larger share of its US sales domestically than its Detroit rivals, but it won't be spared. It builds the entry-level Maverick small pickup in Mexico as well as the Bronco Sport SUV.

European Commission President Ursula von der Leyen said the US decision was regrettable.

"We will now assess this announcement, together with other measures the US is envisaging in the next days," von der Leyen said in a statement. "The EU will continue to seek negotiated solutions, while safeguarding its economic interests."

Canadian Prime Minister Mark Carney said the US tariffs are a "direct attack" on people who work in the auto industry and violate the US-Mexico-Canada trade agreement. He didn't disclose any new retaliatory measures, saying he would fly back to Ottawa for meetings with members of his cabinet first.

Ontario Premier Doug Ford, the leader of the province that's the home of most of Canada's auto industry, said it was virtually guaranteed that Canada would retaliate. He urged Carney to "target American cars" - US-manufactured vehicles have a dominant share of the Canadian vehicle market.

"We're going to make sure that we inflict as much pain as possible to the American people without inflicting pain on the Canadian population," the premier said.

Japanese Prime Minister Shigeru Ishiba said he won't rule out countermeasures against auto levies.

"We must consider appropriate responses and naturally, all options are on the table," Ishiba said Thursday in parliament. "The bottom line is that we must consider what will best serve the national interests of Japan."

Autos Drive America, which lobbies for carmakers based outside the US including Toyota and BMW AG, warned the new levies will do the opposite of what Trump wants.

"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 US," Jennifer Safavian, the group's president, said in a statement.

Trump, though, has argued the tariffs will help spur growth in the domestic auto sector and force companies to move more production to the US.

"Before I was elected, we were losing all of our plants that were being built in Mexico and Canada and other places. Now those plants largely have stopped and they're moving them to our country," he said.

And United Auto Workers President Shawn Fain applauded the move in a statement.

"Ending the race to the bottom in the auto industry starts with fixing our broken trade deals, and the Trump administration has made history with today's actions," Fain said.

Trump, as he fielded questions about the possible increase auto buyers would face, teased his pledge to seek a tax deduction on car loans, asking Republican House Speaker Mike Johnson, who was attending the signing, to include it in an upcoming tax-cut package that is being negotiated in Congress.

"We're trying to get approved, if we can," Trump said. "If you borrow money to buy a car, you're allowed to deduct interest payments for purposes of income tax, but only if the car is made in America."

Trump's actions are poised to make cars more expensive for US consumers already uneasy about inflation and amplify worries that his tariffs will pitch the economy into a downturn. Tariffs will likely raise prices of foreign-made cars, but even US-made vehicles would see price increases if supplies and parts are hit by levies or if supply chains are cut off from manufacturing in lower-cost countries.

US car and light truck imports were valued last year at more than $240 billion.

Analysts have estimated that new tariffs could increase new-car prices by thousands of dollars per vehicle. One recent study found that tariffs on Canada, Mexico and China would raise the cost to produce a crossover vehicle by about $4,000, while a US-made EV would jump by about $12,000.

Trump is betting that his tariff moves will remake US industry and has claimed his approach is already working. Just this week, he hosted executives from Hyundai Motor Co. at the White House and hailed the South Korean automaker's $21 billion US expansion plan as "a clear demonstration that tariffs very strongly work."

But Trump's imposition of trade duties has been erratic, marked by delays and suspensions as he extracts policy concessions from trading partners. Those shifts have rattled markets and made business leaders uneasy as they face investment and hiring decisions.

Trump imposed 25 per cent tariffs on imports from Mexico and Canada earlier in March but delayed those for a month on goods - including automobiles and parts - that are covered by the North American trade deal USMCA. Auto executives from Detroit's Big Three had lobbied Trump for relief, saying they needed more time to adapt given the close integration of the sector across the continent.

Bloomberg