Trump announces 25% tariffs on foreign-built vehicles

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.

As Asian markets opened Thursday, shares in carmakers were down sharply. Japan’s government described the Washington move as “extremely regrettable,” while Prime Minister Shigeru Ishiba said Tokyo was “considering all kinds of countermeasures.”

“What we’re going to be doing is a 25 percent 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 12:01 am (0401 GMT) on April 3 and impact foreign-made cars and light trucks. Key automobile parts will also be hit within the month.

Canadian Prime Minister Mark Carney branded Trump’s tariffs a “direct attack” on his country’s workers. He said that the cabinet would meet Thursday to discuss retaliation.

Peter Navarro, Trump’s senior counselor 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.

Since returning to the presidency in January, Trump has imposed fresh tariffs on imports from major US trading partners Canada, Mexico and China — alongside a 25 percent duty on steel and aluminum.

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 amid fears of the tariffs’ effects.

Wall Street slumped ahead of Trump’s Wednesday afternoon announcement, with shares in General Motors down 3.1 percent although Ford eked out a 0.1 percent gain.

On Thursday in Japan, the world’s top-selling automaker Toyota was down almost 3.5 percent, while Nissan shed 2.5 percent and Honda fell as much as 3.1 percent. Mitsubishi Motors decreased 4.5 percent, while Mazda dropped 5.9 percent and Subaru tumbled 6.1 percent.

In South Korea, Hyundai shares dipped 2.7 percent.

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

But targeting imported cars could strain ties with countries like Japan, South Korea, Canada, Mexico and Germany — which are close US partners.

“Imposing 25 percent 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 percent 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 April 2, which Trump has dubbed “Liberation Day” for the world’s biggest economy.

He has promised reciprocal levies, tailored to different trading partners to remedy practices that 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.