US President Donald Trump has announced sweeping new tariffs of 25% on imported cars and car parts, in a dramatic move that threatens to upend global automotive trade and strain ties with key allies.
The tariffs, unveiled during an Oval Office address, will take effect on April 2 for imported vehicles, with tariffs on car parts introduced in May or later, according to the White House. While Mexico and Canada are temporarily exempt from parts tariffs, their automakers are still impacted by the vehicle duties.
"This is about bringing the American car industry back," Trump said. "It’ll mean tremendous growth, more jobs, and more investment here in the US. If you build your car in America, there is no tariff. It’s that simple."
The US imported roughly 8 million vehicles last year, valued at around $240 billion, accounting for half of all domestic car sales. Top suppliers include Mexico, South Korea, Japan, Canada, and Germany.
Many US manufacturers rely heavily on cross-border supply chains, with components sourced from Mexico and Canada before final assembly in the US. The Anderson Economic Group estimates the tariffs could add between $4,000 and $10,000 to the cost of some vehicles.
Canadian Prime Minister Mark Carney called the move a "direct attack" on Canada’s auto industry. The UK government, concerned for British carmakers like Jaguar Land Rover, said it hoped to secure a bilateral trade deal before the tariffs come into force.
The European Union and Canada are both considering retaliatory action. European Commission President Ursula von der Leyen said the bloc would “carefully assess” the US move before responding.
However, critics warn the policy could raise consumer prices, disrupt the car market, and spark tit-for-tat trade wars.
"While the tariffs may protect domestic manufacturers in the short term, they risk isolating the US from global supply chains that have taken decades to build," said a spokesperson for the Society of Motor Manufacturers and Traders (SMMT) in the UK.
Trump, however, was blunt in his warning to trading partners: “If the EU and Canada collude to do economic harm to the US, there will be far larger tariffs.”
As the global auto industry braces for impact, all eyes will be on how America's allies and trading partners respond—and whether a full-scale trade war can be avoided.
The tariffs, unveiled during an Oval Office address, will take effect on April 2 for imported vehicles, with tariffs on car parts introduced in May or later, according to the White House. While Mexico and Canada are temporarily exempt from parts tariffs, their automakers are still impacted by the vehicle duties.
"This is about bringing the American car industry back," Trump said. "It’ll mean tremendous growth, more jobs, and more investment here in the US. If you build your car in America, there is no tariff. It’s that simple."
Economic Shockwaves
The announcement sent immediate shockwaves through financial markets. Shares in General Motors fell by nearly 3%, with other major automakers like Ford and foreign brands also seeing declines. Analysts warned of widespread price increases, potential factory shutdowns, and deep disruptions to supply chains that span borders.The US imported roughly 8 million vehicles last year, valued at around $240 billion, accounting for half of all domestic car sales. Top suppliers include Mexico, South Korea, Japan, Canada, and Germany.
Many US manufacturers rely heavily on cross-border supply chains, with components sourced from Mexico and Canada before final assembly in the US. The Anderson Economic Group estimates the tariffs could add between $4,000 and $10,000 to the cost of some vehicles.
Global Backlash and Retaliation Risks
Japan, the second-largest car exporter in the world, signaled strong opposition, saying it would put “all options on the table” in response. Shares in Toyota, Nissan, and Honda dropped in Tokyo trading.Canadian Prime Minister Mark Carney called the move a "direct attack" on Canada’s auto industry. The UK government, concerned for British carmakers like Jaguar Land Rover, said it hoped to secure a bilateral trade deal before the tariffs come into force.
The European Union and Canada are both considering retaliatory action. European Commission President Ursula von der Leyen said the bloc would “carefully assess” the US move before responding.
A Broader Economic Gambit
Trump's move is part of his wider “America First” agenda, aimed at reshoring manufacturing and reviving traditional industries. He has argued for years that the US has been exploited by foreign producers and unfair trade deals.However, critics warn the policy could raise consumer prices, disrupt the car market, and spark tit-for-tat trade wars.
"While the tariffs may protect domestic manufacturers in the short term, they risk isolating the US from global supply chains that have taken decades to build," said a spokesperson for the Society of Motor Manufacturers and Traders (SMMT) in the UK.
Uncertain Road Ahead
The White House has not indicated whether exemptions could be negotiated, although sources suggest talks are underway with Canada, Japan, and the EU.Trump, however, was blunt in his warning to trading partners: “If the EU and Canada collude to do economic harm to the US, there will be far larger tariffs.”
As the global auto industry braces for impact, all eyes will be on how America's allies and trading partners respond—and whether a full-scale trade war can be avoided.
