WASHINGTON : President Donald Trump said Wednesday that he would impose a 25 per cent tariff on cars and car parts that were imported into the United States, a move that is likely to raise prices for American consumers and throw supply chains into disarray as the president seeks to bolster US manufacturing.
The tariffs will go into effect April 3 and apply both to finished cars and trucks that are shipped into the United States and to imported parts that are assembled into cars at American auto plants. Those tariffs will hit foreign brands as well as American ones that build some of their vehicles in Canada or Mexico.
Nearly half of all vehicles sold in the United States are imported, as well as nearly 60 per cent of the parts in vehicles assembled in the United States. That means the tariffs could push up car prices significantly.
Trump said the tariffs would encourage auto companies and their suppliers to set up shop in the United States. “Anybody who has plants in the United States, it’s going to be good for,” he said.
But the auto industry is global and has been built up around trade agreements that allow factories in different countries to specialize in certain parts or types of cars, with the expectation that they would face little to no tariffs.
Mexico is the largest source of vehicle imports in the United States, followed by Japan, South Korea, Canada and Germany.
Stock markets fell on news that the auto tariffs would be imposed. Shares of major carmakers tumbled further in after-hours trading, after the White House clarified that the tariffs would also cover imported auto parts.
Trump argues that the tariffs will increase domestic auto production, but it’s not clear how fast he can accomplish that goal. Tariffs can encourage companies to use more products from the United States and expand production, but new factories typically take several years and can cost billions of dollars to construct.
The additional costs that tariffs will introduce could also backfire economically, harming the US auto industry by squeezing its profits and slowing its sales.
The measure could also set off more trade clashes with foreign countries that send many cars to the United States. And it could invite retaliation on American exports, including cars and agricultural products.
