WASHINGTON (AP) — President Donald Trump said he was placing 25% tariffs on auto imports, a move the White House claims would foster domestic manufacturing but could also put a financial squeeze on automakers that depend on global supply chains.
“This will continue to spur growth,” Trump told reporters Wednesday. “We’ll effectively be charging a 25% tariff.”
The tariffs, which the White House expects to raise $100 billion in revenue annually, could be complicated as even U.S. automakers source their components from around the world. The tax hike starting in April means automakers could face higher costs and lower sales, though Trump argues that the tariffs will lead to more factories opening in the United States and the end of what he judges to be a “ridiculous” supply chain in which auto parts and finished vehicles are manufactured across the United States, Canada and Mexico.
To underscore his seriousness about the tariffs directive he signed, Trump said, “This is permanent.”
The Republican president reiterated his willingness to challenge allies by saying Thursday on social media that if the European Union coordinated with Canada, tariffs “far larger than currently planned” would be placed on them in retaliation.
Shares in General Motors tumbled roughly 5% in Thursday morning trading. Ford’s stock fell 2%. Shares in Stellantis, the owner of Jeep and Chrysler, dropped 1%. But the stock prices of electric vehicle makers Tesla and Rivian were up.
The American Automotive Policy Council, which represents domestic automakers, said in a statement that “it is critical that tariffs are implemented in a way that avoids raising prices for consumers and that preserves the competitiveness of the integrated North American automotive sector,” which depends on the U.S.-Mexico-Canada trade deal negotiated during Trump’s first term.
The group’s president, former Republican Gov. Matt Blunt of Missouri, said in an email response to questions from The Associated Press that “we have clearly expressed concerns related to prices and other impacts to the administration as well as our belief that a modernized” North American trade agreement should remain in place.
Trump has long said that tariffs against auto imports would be a defining policy of his presidency, betting that the costs created by the taxes would cause more production to relocate to the United States while helping narrow the budget deficit. But U.S. and foreign automakers have plants around the world to accommodate global sales while maintaining competitive prices — and it could take years for companies to design, build and open the new factories that Trump is promising.
“We’re looking at much higher vehicle prices,” said economist Mary Lovely, senior fellow at the Peterson Institute for International Economics. “We’re going to see reduced choice. … These kinds of taxes fall more heavily on the middle and working class.’’
She said more households will be priced out of the new car market — where prices already average about $49,000 — and will have to hang on to aging vehicles.
The tariffs on autos would start being collected on April 3, Trump said. If the taxes are fully passed onto consumers, the average auto price on an imported vehicle could jump by $12,500, a sum that could feed into overall inflation. Trump was voted back into the White House last year because voters believed he could bring down prices.
Foreign leaders were quick to criticize the tariffs, a sign that Trump could be intensifying a broader trade war that could damage growth worldwide.
“This is a very direct attack,” Canadian Prime Minister Mark Carney said. “We will defend our workers. We will defend our companies. We will defend our country.”
In Brussels, European Commission President Ursula von der Leyen expressed regret at the U.S. decision to target auto exports from Europe and vowed that the bloc would protect consumers and businesses.
“Tariffs are taxes — bad for businesses, worse for consumers equally in the U.S. and the European Union,” she said in a statement, adding that the EU’s executive branch would assess the impact of the move, as well as other U.S. tariffs planned for coming days.
