President Donald Trump signed an order to implement a 25 per cent tariff on auto imports, expanding a trade war designed to bring more manufacturing jobs to the U.S. 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, casting the measure as “very modest.”
“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,” he added.
Trump said the tariffs would go into effect on April 2 and that the U.S. would start to collect them a day later. 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 US$100 billion of new annual revenue to the U.S.
Shares of General Motors Co., Ford Motor Co. and Stellantis NV dropped in after-hours trading, led by a decline of 2.8 per cent by Stellantis.
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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 U.S. trade deficits. Those tariffs will see the U.S. 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 in April 2, and I look forward to it,” Trump said Wednesday.
The auto levies would 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 U.S. trading partners. The move risks disrupting operations for North American automakers, which rely on highly integrated chains across the U.S., Mexico and Canada.
Trump, though, has argued the tariffs will help spur growth in the domestic auto sector and force companies to move more production to the U.S.
“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. “A lot of companies are going to be in great shape, because they’ve already built their plant, but their plants are over-utilized, so they’ll be able to expand them inexpensively and quickly, but others will come into our country and build and they’re already looking for sites.”
Auto tariffs could potentially target a significant swath of U.S. car and light truck imports, valued last year at more than $240 billion.
Trump reiterated his pledge to seek a tax deduction on car loans, asking Republican House Speaker Mike Johnson 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 U.S. 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 U.S.-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.
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 U.S.-made EV would jump by about $12,000.
Trump is betting that his tariff moves will remake U.S. 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 U.S. 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.
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The new tariffs will exacerbate their concerns, with Trump having said he would not give U.S. carmakers another reprieve. While Trump has said he wants more domestic production, that could be years away given the time it takes to build new factories and concerns about how feasible it will be for many suppliers to shift.
Leaders of Ford and Jeep maker Stellantis have urged the White House to target the roughly 4 million vehicles imported to the U.S. annually that are made without U.S. parts content.
Jennifer A. Dlouhy, Josh Wingrove, Joe Deaux and Gabrielle Coppola, Bloomberg News
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