Donald Trump announced plans to impose sweeping 25% tariffs on cars from overseas on Wednesday, days before the US president is expected to announce wide-ranging levies on other goods from around the world.
“What we’re going to be doing is a 25% tariff for all cars that are not made in the United States,” Trump said in the Oval Office. “We start off with a 2.5% base, which is what we’re at, and go to 25%.”
The announcement drew swift condemnation from the European Union and from the Canadian prime minister, Mark Carney, who called it a “direct attack” on Canadian workers. “We will defend our workers, we will defend our companies, we will defend our country, and we will defend it together,” Carney said.
The Japanese prime minister, Shigeru Ishiba, said his government was considering “appropriate measures” in response to the announcement. “Naturally, we will consider all options.”
The tariffs will go into effect next week, on 2 April, the president claimed, and the US will start collecting them the following day. “This is very exciting,” he said, suggesting the move would spur economic growth.
In February, Trump floated the idea of a 25% tariff on imported vehicles but offered no other details. On Monday, the president hinted that the auto industry levies could come in “the very near future”.
On 2 April – a day Trump has dubbed “liberation day” – the president is expected to unveil a wide range of so-called reciprocal tariffs: levies on imported goods that the Trump administration argues are unfairly taxed by the US’s trading partners.
Trump has long argued that the US is being cheated by its trading partners and that tariffs are the best remedy. However, he has delayed or watered down his tariff plans on several occasions. His stance has worried investors, leading to sharp sell-offs in US stock markets, and has proved unpopular with both the corporate US and consumers.
Many economists have expressed alarm, too, warning that the president’s tariff plan would risk increasing prices across the US. A study by Anderson Economic Group, an automotive consultant, for example, found that blanket tariffs on Canada and Mexico risks increasing US car prices by as much as $12,000.
Mexico, Japan, South Korea, Canada and Germany are among the top car exporters to the US. Will Scharf, a White House official, claimed the new car tariffs would result in more than $100bn in annual revenue to the US.
Shares of automakers fell in after-hours trading and US equity index futures slid, indicating stocks were headed for a lower open on Thursday.
Shares in Toyota, the world’s top-selling automaker, dropped 3.7% in early trading in Tokyo, while Nissan lost 3.2% and Honda 3.1%. In South Korea, Hyundai shares fell 3.4%.
The tariffs will rattle Japan’s auto industry, a key component of the world’s fourth-largest economy. The sector accounts for about a tenth of Japan’s workforce, while vehicles made up about a third of its ¥21.3tn ($142bn) in exports to the US last year.
Speaking before Trump’s announcement, Masanori Katayama, chair of the Japan Automobile Manufacturers Association, said a 25% tariff on cars from overseas “would have a negative impact overall on the economies of the United States and Japan”.
Despite hopes that Japan would not be targeted, ministers in Tokyo have so far been unsuccessful in persuading their US counterparts to grant exemptions on exports such as steel and vehicles.
Trump wrote on Truth Social earlier this month: “Have no fear, we will WIN everything!!!”, claiming that tariffs were already “pouring money” into the country.
But a Harris poll conducted for the Guardian found that the majority of Americans were already worried about the impact tariffs would have on their finances. Ninety per cent of Democrats, 69% of independents and 57% of Republicans reported they were concerned about tariffs.
Industry groups sounded the alarm on Wednesday. “Throwing away tens of thousands of jobs on both sides of the border will mean giving up North America’s auto leadership role, instead encouraging companies to build and hire anywhere else but here,” said Candace Laing, president and CEO of the Canadian Chamber of Commerce. “This tax hike puts plants and workers at risk for generations, if not forever.”
