US President Donald Trump has announced a 25% tariff on all cars and car parts not made in the United States, triggering a global sell-off in auto stocks and immediate condemnation from key trading partners including Japan, Canada, and the European Union.
The tariffs, which take effect on 2 April, will apply to all foreign-made cars and light trucks, with duties on parts to follow in May. Vehicles built in the US will be exempt. The White House projects the measures will generate over US$100bn in annual revenue and bolster domestic manufacturing.
“This is permanent,” Trump declared during the Oval Office signing of the presidential proclamation. “If you build your car in the United States, there is no tariff.”
Reaction
Global markets reacted swiftly. Shares of Toyota and Honda fell by 3.7% and 2.9% respectively, while South Korea’s Kia dipped 2.8% and China’s Nio dropped nearly 4%. US automakers also declined in after-hours trading, with General Motors and Ford down roughly 5%.
Industry experts cautioned that the tariffs could backfire, warning of higher prices, production disruption, and strained diplomatic ties. “Every automaker that sells vehicles in the US depends on global supply chains,” said Karl Brauer of iSeeCars, noting that even US-assembled cars often rely on foreign parts. “These costs will either reduce an automaker’s profit or be passed on to consumers.”
The American Automotive Policy Council urged the administration to avoid raising consumer prices and protect the North American automotive sector. A 2024 US International Trade Commission study estimated that 25% import tariffs would reduce foreign vehicle imports by 75% and raise average car prices in the US by 5%.
Allies vow retaliation
The move drew immediate political backlash. Canadian Prime Minister Mark Carney called the tariffs a “direct attack” and pledged to defend Canadian workers and companies. Canada has already prepared a C$155bn strategic response fund and is considering retaliatory duties.
In Japan, Prime Minister Shigeru Ishiba told parliament that “all options are on the table” and questioned the logic of uniform tariffs against major US investors like Japanese carmakers. Automobiles account for 28% of Japan’s exports to the US and 3% of its GDP.
European Commission President Ursula von der Leyen described the tariffs as “bad for businesses, worse for consumers,” and confirmed the EU would pursue a negotiated response while protecting its economic interests.
