Trump imposes 25% tariffs on cars, escalating trade conflict

U.S. President Donald Trump has introduced a 25% tariff on imported cars and automotive parts, marking a significant escalation in the ongoing trade war. During his announcement at the White House, Trump framed the tariffs as a necessary action to reclaim economic losses from foreign nations that have taken American jobs and wealth. He emphasized that even U.S. allies had been more harmful than adversaries in this respect.

Trump described the move as "modest" but expressed optimism about its potential to stimulate U.S. manufacturing and economic growth. According to a White House fact sheet, the tariffs, set to take effect on April 2, are intended to safeguard the U.S. automotive industry from excessive foreign imports that have threatened domestic production and supply chains.

The tariffs also target countries with unfair trade practices and industrial policies, which, according to the White House, have led to stagnation in U.S. manufacturing. Under the U.S.-Mexico-Canada Agreement, companies importing cars or parts can certify the proportion of U.S.-made content to avoid tariffs on foreign-made components.

The announcement sparked backlash from key trading partners, including the European Union, Canada, and Japan. European Commission President Ursula von der Leyen warned that the tariffs would harm businesses and consumers. Canadian Prime Minister Mark Carney denounced the tariffs as an attack on Canadian workers, while Japanese Prime Minister Shigeru Ishiba pledged to explore appropriate countermeasures.

The tariffs threaten to disrupt the global auto industry, particularly in North America, where long-standing tariff-free trade has led to highly integrated supply chains between the U.S., Mexico, and Canada. Analysts predict that the tariffs will likely raise prices across all segments of the auto market, both imported and domestic, reducing consumer demand.

Industry representatives, such as the American Automotive Policy Council, expressed concerns about the impact of the tariffs on consumer prices but reaffirmed their commitment to increasing U.S. production. The U.S. imported $214 billion worth of passenger cars in 2024, with major exporters including Japan, South Korea, Germany, and Canada.

Shares of Japanese and South Korean carmakers dropped sharply following Trump’s announcement, with analysts predicting significant damage to the Japanese automotive industry. Smaller suppliers may face bankruptcy due to the higher tariffs, potentially leading to a reduction in overall production.

While Trump has framed the tariffs as beneficial for the U.S., critics argue they will ultimately lead to higher prices, fewer options for American consumers, and a reduction in domestic manufacturing jobs. Trump is set to announce further reciprocal tariffs on April 2, aiming at countries perceived to be exploiting the U.S. economically.