Trump presses ahead with auto tariffs, ratcheting up trade war

US President Donald Trump has unveiled a 25 per cent tariff on imported cars and light trucks starting next week, widening the global trade war he kicked off upon regaining the White House this year in a move auto industry experts expect will drive up prices and stymie production.

"What we're going to be doing is a 25 per cent tariff for all cars that are not made in the United States," Trump said at an event in the Oval Office.

Trump, who sees tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining US industrial base, said collections would begin on April 3, the day after he plans to announce reciprocal tariffs aimed at the countries responsible for the bulk of the US trade deficit.

European Commission President Ursula von der Leyen described the move as "bad for businesses, worse for consumers," while Canadian Prime Minister Mark Carney labeled 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 told reporters in Ottawa.

The United Auto Workers, long-standing critics of free trade agreements it says have destroyed American jobs, lauded it. "These tariffs are a major step in the right direction for autoworkers and blue-collar communities across the country, and it is now on the automakers, from the Big Three to Volkswagen and beyond, to bring back good union jobs to the US," UAW President Shawn Fain said in a statement.

Shares of automakers fell in after-hours trading and US equity index futures slid, indicating stocks were headed for a lower open on Thursday.

The legal basis for the action is a 2019 national security investigation under Section 232 of the Trade Act of 1962 into auto imports conducted by Trump's first administration. That probe found that auto imports impair US national security, but at the time Trump did not take action to impose tariffs.

In an indication of the hastiness with which the new levies are being imposed, Trump's directive included temporary exemptions for auto parts while government officials sort through the complexities of turning his proclamation into practice.

Brad Setser, a former US Treasury official now with the Council on Foreign Relations, said some 4 million cars from Canada and Mexico now faced 25 per cent or more tariffs, which would likely drive up prices and dampen US car sales for "a while". He said the tariffs were a "clear violation" of USMCA and also raised questions about South Korea's free trade agreement.

The economic impact could be significant, he said, noting that US imports of finished vehicles are close to a percentage point of US gross domestic product.

The US imported $474 billion (AED 1.7 trillion) worth of automotive products in 2024, including passenger cars worth $220 billion (AED 808 billion). Mexico, Japan, South Korea, Canada and Germany, all close US allies, were the biggest suppliers.