US President Donald Trump has announced new import taxes of 25% on cars and car parts coming into the US in a move that threatens to widen the global trade war.
Trump said the latest tariffs would come into effect on 2 April, with charges on businesses importing vehicles starting the next day. Charges on parts are set to start in May or later.
The president claimed the measure would lead to “tremendous growth” for the car industry, promising it would spur jobs and investment in the US.
But analysts have said the move is likely to lead to the temporary shutdown of significant car production in the US, increase prices, and strain relations with allies.
The US imported roughly eight million cars last year, accounting for about $240bn (£186bn) in trade and roughly half of overall sales.
Mexico is the top foreign supplier of cars to the US, followed by South Korea, Japan, Canada and Germany. Trump’s latest move threatens to upend global car trade and supply chains.
Many US car companies have operations in Mexico and Canada as well, set up under the terms of the longstanding free trade agreement between the three countries.
The White House said the order would apply not only to finished cars but also to car parts, which are often shipped in from other countries before getting assembled in the US.
However, the new tariffs on parts from Canada and Mexico are exempt while US customs and border patrol set up a system to assess the duties, the White House said. The neighbouring countries see goods worth billions cross borders each day.
On Wednesday, shares in General Motors slid roughly 3%. The sell-off spread to other companies, including Ford, after the president’s remarks as he confirmed the tariffs.
Asked at a press conference if there was any chance he would reverse course, Trump said no, adding later: “This is permanent.”
“If you build your car in the United States there is no tariff,” he said.
Japanese Prime Minister Shigeru Ishiba said his government would put “all options on the table” in response to the tariffs.
Japan, which is home to several major motor industry giants, is the world’s second largest exporter of cars.
Shares in Japanese carmakers – including Toyota, Nissan, Honda – fell in early trade in Tokyo.
A tariff is a tax on imports collected by a government and it is paid by the company importing the good.
Trump has embraced the tool, looking to apply it to a host of goods being imported into the US as part of a wider drive to protect American businesses and boost manufacturing.
But while the measures can protect domestic businesses, they also raise costs for businesses reliant on parts from abroad, as is the case for car-makers.
Analysts have estimated that the cost of a car could rise thousands of dollars, with 25% tariffs on parts from Mexico and Canada alone adding $4,000-$10,000 in cost depending on the vehicle, according to the Anderson Economic Group.
