President Donald Trump has unveiled 25% import taxes on cars and car parts entering the US.
According to a report by Reuters, the new tariffs on cars and light trucks will come into effect on 3 April.
On 2 April, Trump plans to announce reciprocal tariffs aimed at the countries that he blames for the bulk of the US trade deficit.
In 2024 alone the US imported $474 billion worth of automotive products, including passenger cars worth $220 billion. Most of the largest suppliers were close US allies such as Mexico, Japan, South Korea, Canada, and Germany.
The new tariffs were met with many strict responses from leaders around the world.
The Canadian Prime Minister Mark Carney said the tariffs were a “direct attack” and warned that Canada was considering retaliatory measures.
“We will defend our workers, we will defend our companies, we will defend our country, and we will defend it together," he said.
“Tariffs are a sucker punch for Europe at a time when relations with Washington have plummeted over issues such as the war in Ukraine and the upending of a decades-old Transatlantic alliance, with the U.S. as the ultimate guarantor of European security,” Reuters said.
Billions of euros were lost in German automobile equity on Thursday morning, prompting a response from the German Economy Minister Robert Habeck.
"What counts now is to have a firm response to these tariffs from the EU. It needs to be clear that we will not take this lying down," he said in a statement. He added that the EU needs to seek a negotiated solution.
Germany’s head of the car industry association, Hildegard Müller, said the tariffs were a “fatal signal” for global trade.
According to Reuters, the Chinese foreign ministry said the U.S. approach violates World Trade Organization rules, undermines the multilateral trade system, and was "not conducive to solving its own problems."
The French Finance Minister Eric Lombard called Trump's plan "very bad news" and said the only solution was for the EU to raise its own tariffs.
This comes against the backdrop of France hosting a Ukraine summit without the U.S. this Thursday.
The U.K. also threatened to review subsidies given to Elon Musk's Tesla.
The EU said it was preparing a robust response while trying to avoid a tariff war, Reuters said.
Nigel Green, the CEO of the global financial advisory deVere Group, said "None of this leads to more jobs or better wages. It leads to sluggish sales, costlier credit, and potential layoffs — exactly what a fragile economy doesn't need."
"Tariffs won't drive carmakers home. They'll drive prices up, relationships down, and America's global standing into reverse."
Trump threatens further with tariffs
The European car industry has called for a transatlantic deal to avert a tariff spiral. Suppliers have voiced concerns over immediate price hikes, while dealers fear the impact of a drop in demand on employment in automobile-dependent nations.
Lindsay James, an investment strategist at Quilter, shared that Europe would be heavily affected since the US accounts for over a fifth of the EU export market and around 18% of Britain’s car exports.
"In a sector that is vital for the European economy in particular, accounting for around 7% of GDP and 6% of employment, there will an obvious blowback on a sector that has already faced considerable headwinds from a painful transition to EVs alongside tighter regulations, in addition to slower replacement cycles from drivers and higher energy costs."
In response to the falling shares, the Japanese Prime Minister Shigeru Ishiba said that Tokyo will put "all options on the table." Meanwhile, South Korea said that it would come up with an emergency response by April.
While Trump sees tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining U.S. industrial base, many trade experts expect prices to initially rise and demand to fall, hurting the global auto industry. The sector already faces huge uncertainty due to Trump's swift tariff threats and occasional reversals.
Reuters reported that Trump threatened to hit the EU and Canada with larger tariffs should they team up to retaliate.
"If the European Union works with Canada in order to do economic harm to the USA, large scale Tariffs, far larger than currently planned, will be placed on them both in order to protect the best friend that each of those two countries has ever had," Trump wrote in a post on Truth Social.
