Trump announces 25% tariffs on car imports to US

U.S. President Donald Trump has announced that he will impose a new 25% import tariff on cars and auto parts entering the United States, a move that could escalate the global trade war. Trump stated that the latest tariffs will take effect on April 2, with fees levied on companies importing vehicles beginning the following day. Charges on parts are expected to begin in May or later.

Trump claims that the measure will bring "tremendous growth" to the auto industry and has pledged that it will stimulate American jobs and investment. However, analysts say the move could lead to temporary shutdowns of U.S. auto production, raise prices, and strain relations with allies. The U.S. imported approximately 8 million vehicles last year, with a trade value of around $240 billion, accounting for about half of total sales.

Mexico is the largest foreign supplier of automobiles to the United States, followed by South Korea, Japan, Canada, and Germany. Trump's latest move threatens to disrupt global auto trade and supply chains. Many U.S. auto companies also have operations in Mexico and Canada, established under long-standing free trade agreements between the three countries. The White House has indicated that the order applies not only to finished vehicles but also to auto parts, which are often shipped from other countries and then assembled in the United States.

However, the White House stated that new tariffs on parts from Canada and Mexico will be waived while a system for assessing the tariffs is established. Billions of dollars worth of goods cross the borders of these two neighboring countries every day. On Wednesday, shares of General Motors fell by about 3%. The sell-off spread to other companies, including Ford, after the president confirmed the tariffs. At a press conference, when asked if there was any chance he would change his mind, Trump said no, adding, "This is permanent."

"If you build cars in the United States, there are no tariffs," he said. Japanese Prime Minister Shigeru Ishiba stated that his government would put "all options on the table" in response to the tariffs. Japan, home to several major auto industry giants, is the world's second-largest exporter of automobiles. Shares of Japanese automakers, including Toyota, Nissan, and Honda, fell in early trading in Tokyo.

Tariffs are import taxes levied by the government and paid by companies importing goods. Trump has embraced this tool, seeking to apply it to a wide range of goods imported into the United States as part of a broader effort to protect American businesses and promote manufacturing. But while these measures can protect domestic businesses, they can also raise costs for businesses that rely on foreign parts, such as automakers.

Analysts estimate that the cost of a car could rise by thousands of dollars, with a 25% tariff on parts from Mexico and Canada alone potentially adding $4,000-$10,000 in costs, according to the Anderson Economic Group, depending on the vehicle. The new auto import taxes are scheduled to take effect on the same day as so-called reciprocal tariffs, which are determined based on individual countries' trade relationships with the United States. It is not yet clear how the auto tariffs might affect these plans.

Many countries, including the United Kingdom, are concerned that their exporters will be affected by the new taxes. The United States was the largest sales market for UK-based Jaguar Land Rover last year, with the automaker selling 116,294 vehicles to Americans, exceeding sales to customers in the UK and China. The UK government is in talks with the US government and remains hopeful that a trade deal can be reached before the tariffs take effect, the BBC understands.

Canadian Prime Minister Mark Carney called Trump's announcement a "direct attack" on his country and its auto industry. "This will hurt us, but through this period, by standing together, we will be stronger," he said. European Commission President Ursula von der Leyen said the EU would consider the measures before taking any possible response. "As I have said before, tariffs are taxes – bad for business, bad for consumers, both in the U.S. and the EU," she said. "The EU will continue to seek a negotiated solution, while safeguarding its economic interests."

For the UK, the US is the second-largest export market for cars after the EU, primarily shipping luxury vehicles across the Atlantic, according to industry body the Society of Motor Manufacturers and Traders (SMMT). SMMT chief executive Mike Hawes urged the UK and US governments to "get around the table immediately to agree a deal that works for everyone." The auto industry is already struggling to cope with the expansion of steel and aluminum tariffs implemented by Trump earlier this month.

In recent weeks, major auto companies such as Ford and General Motors have urged the president to exclude the industry from any further tariffs. A [2024 study by the U.S. International Trade Commission](https://www.usitc.gov/publications/332/working_papers/ecwp_2024-02-c.pdf) predicts that a 25% tariff on imported goods would reduce imports by nearly 75%, while also raising the average price in the United States by about 5%.

But Trump has moved forward, in a revival of action first considered during his first term in the White House. White House officials say they want to see American workers making more of the parts, not just assembling them, and insist their actions are driving businesses to relocate. On the day before the latest tariffs were due to take effect, South Korean auto giant [Hyundai announced it would invest $21 billion in the United States](https://www.bbc.com/news/articles/cgkmvdz144vo) and build a new steel plant in southern Louisiana.

Trump hailed the investment as "clear proof that tariffs are very effective." United Auto Workers leader Shawn Fain, who opposed Trump in the election, praised the president's actions, saying he is "stepping up to end decades of free trade disasters that have destroyed working-class communities." Additionally, Matt Blunt, head of the trade group American Automotive Policy Council, stated: "U.S. automakers are committed to President Trump’s vision of increasing American automotive production and jobs."