US President Donald Trump announced on Wednesday, March 26, steep tariffs on auto imports and parts, provoking threats of retaliation from trading partners ahead of further promised trade levies next week. Wall Street slumped ahead of Trump's Wednesday afternoon announcement, while the world's top-selling automaker Toyota plunged more than 3%.
Japan's government described the announcement 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% 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 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 and said the cabinet would meet Thursday to discuss retaliation. Brazil's President Luiz Inacio Lula da Silva said his country "cannot stand still" in response to the levies.
The move even appeared to raise eyebrows from Trump ally and Tesla boss Elon Musk, who said the cost impact of the tariffs on his firm's cars was "not trivial." "To be clear, this will affect the price of parts in Tesla cars that come from other countries. The cost impact is not trivial," he posted on X.
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 beginning his second term in January, Trump has imposed fresh tariffs on imports from major US trading partners Canada, Mexico and China – alongside a 25% 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.
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. Wall Street slumped ahead of Trump's announcement, with shares in General Motors and Stellantis each down more than 3%. On Thursday in Japan, the world's top-selling automaker Toyota shed more than 3%. Among other carmakers, Nissan lost 2.5%, Honda shed 3.1% and Mitsubishi Motors gave up 4.5%, while Mazda and Subaru both gave up around 6%. South Korea's Hyundai retreated 2.7% in Seoul.
Trump has defended the levies as a way to raise government revenue and revitalize American industry. But targeting imported cars could strain ties with close partners such as Japan, South Korea, Canada, Mexico and Germany.
Half of US-made cars are assembled from foreign parts
About 50% 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.
Besides the automobile industry, Trump is also eyeing sector-specific tariffs, such as on pharmaceuticals, semiconductors and lumber. Wednesday's announcement comes ahead of Trump's so-called "Liberation Day" for the world's biggest economy on April 2.
He has promised reciprocal levies, tailored to different trading partners to remedy practices 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.