Donald Trump revealed plans on Wednesday to implement sweeping 25% tariffs on foreign cars.
He announced that the United States would impose a 25% duty on all vehicles manufactured outside the country, and said the current tariff of 2.5% would be raised significantly.
The announcement was met with immediate criticism from the European Union and the Canadian prime minister, Mark Carney, who described the move as a direct assault on Canadian workers. Carney emphasised that his government would take a firm stand in defence of the country’s workforce, industries, and economy.
The Japanese prime minister, Shigeru Ishiba, responded by saying his administration was evaluating suitable countermeasures in reaction to the decision, asserting that all possibilities remained under consideration.
Trump said the tariffs would take effect on 2 April, with collections beginning the following day. He claimed that the measure would provide a boost to the economy.
In February, he had raised the possibility of imposing a 25% duty on imported cars but had not provided the specifics. Earlier this week, he indicated that the tariffs on the automobile industry could be introduced in the near future.
On 2 April, a day Trump has referred to as “liberation day,” he is expected to announce a series of so-called reciprocal tariffs—duties on imported goods that his administration claims have been unfairly taxed by America’s trading partners.
Trump has repeatedly argued that the US has been exploited in global trade and that tariffs serve as the most effective countermeasure. However, he has previously postponed or diluted his tariff plans, a stance that has unsettled investors, triggering steep market declines, and has been met with disapproval from American businesses and consumers alike.
Many economists have expressed concern, warning that these tariffs could drive up prices across the United States. A study estimated that broad tariffs on Canada and Mexico could push up the price of cars in the US by as much as $12,000.
Among the major car exporters to the US are Mexico, Japan, South Korea, Canada, and Germany. Automaker shares fell in after-hours trading, while US stock index futures declined, signalling a lower market opening on Thursday. Toyota, the world’s leading car manufacturer, saw its share price drop by 3.7% in early trading in Tokyo, while Nissan and Honda experienced declines of 3.2% and 3.1% respectively. In South Korea, Hyundai’s stock was down 3.4%.
The Japanese automobile industry, a vital part of the world’s fourth-largest economy, is likely to be significantly affected by these tariffs. The sector employs around a tenth of Japan’s workforce, and vehicles accounted for approximately a third of the nation’s exports to the US last year.
The Japan Automobile Manufacturers Association has warned that such a tariff hike would have a detrimental effect on both the American and Japanese economies.
Despite efforts from Tokyo to secure exemptions on exports such as steel and vehicles, Japanese ministers have thus far been unsuccessful in persuading their US counterparts to reconsider.
Trump has recently asserted that his tariff policies were already bringing substantial revenue into the country. However, industry organisations issued warnings on Wednesday. For instance, the Canadian Chamber of Commerce, cautioning that such a move would result in the loss of tens of thousands of jobs on both sides of the border. It argued that it would undermine North America’s leadership in the auto industry and drive companies to relocate production and hiring elsewhere, jeopardising manufacturing plants and employment for generations to come.
