Berliner Boersenzeitung - Global outcry as Trump heaps 25% tariffs on foreign-built vehicles

Major car exporter Germany called for a firm response from the EU, while Japan said it "will consider all options."

Stock markets across Asia and Europe skidded into the red as auto manufacturers from Toyota to Hyundai and Mercedes led the plunge.

The US duties will take effect at 12:01 am (0401 GMT) on April 3 and impact foreign-made cars and light trucks. Key automobile parts will also be hit within the month.

"What we're going to be doing is a 25 percent tariff on all cars that are not made in the United States. If they're made in the United States, it is absolutely no tariff," Trump said at the White House.

France Finance Minister Eric Lombard condemned the "hostility," saying that the "only solution for the European Union will be to raise tariffs on American products in response."

Canada's Prime Minister Mark Carney said he had convened a meeting Thursday to "discuss our trade options."

As Washington's major trading partners warned of retaliatory action, Trump ramped up his threats.

"If the European Union works with Canada in order to do economic harm to the USA, large scale Tariffs, far larger than currently planned, will be placed on them both in order to protect the best friend that each of those two countries has ever had!" Trump posted on his TruthSocial network.

But Trump's levies rattled domestic manufacturers too, with his top ally and Tesla boss Elon Musk admitting his company would not be spared the pain.

"To be clear, this will affect the price of parts in Tesla cars that come from other countries. The cost impact is not trivial," Musk wrote on X.

The association of American Automakers warned in a statement that the tariffs must be implemented in a way that "avoids raising prices for consumers" and preserves the industry's competitiveness.

- 'Cheaters' -

The Center for Automotive Research has previously estimated that US tariffs –- including those on imported autos and metals –- could increase the price of a car by thousands of dollars and weigh on the jobs market.

But Peter Navarro, Trump's senior counselor for trade and manufacturing, in a briefing after Trump's announcement, blasted "foreign trade cheaters" who he said turned America's manufacturing sector into a "lower wage assembly operation for foreign parts."

He took aim at Germany and Japan for reserving the construction of higher-value parts to their countries.

Since beginning his second term in January, Trump has imposed fresh tariffs on imports from major US trading partners Canada, Mexico and China -- alongside a 25 percent duty on steel and aluminum.

The latest levies will be in addition to those already in place.

But the White House added that vehicles entering under the US-Mexico-Canada Agreement (USMCA) can qualify for a lower rate depending on their American content.

Similarly, USMCA-compliant auto parts will remain tariff-free as officials establish a process to target their non-US content.

- 'Devastating impact' -

Uncertainty over Trump's trade plans and worries they could trigger a downturn have roiled financial markets, with consumer confidence also falling in recent months.

Trump has defended the levies as a way to raise government revenue and revitalize American industry.

But targeting imported cars could strain ties with close partners such as Japan, South Korea, Canada, Mexico and Germany.

"Imposing 25 percent tariffs on imported cars will have a devastating impact on many of our close trading partners," said Wendy Cutler, vice president at the Asia Society Policy Institute and a former US trade negotiator.

She added that Washington has free-trade agreements with some affected parties, "calling into question the value of US commitments" under a trade deal.

About one in two cars sold in the United States are manufactured within the country. Among imports, about half come from Mexico and Canada, with Japan, South Korea and Germany also being major suppliers.

And of the US-made cars, more than half were assembled from foreign parts, said a White House official.

- 'Liberation Day' -

Besides the automobile industry, Trump is also eyeing sector-specific tariffs, such as on pharmaceuticals, semiconductors and lumber.

Wednesday's announcement comes ahead of Trump's so-called "Liberation Day" for the world's biggest economy on April 2.

He has promised reciprocal levies, tailored to different trading partners to remedy practices Washington deemed unfair. On Wednesday he said these duties will impact all countries.

While Trump has invoked emergency economic powers for some recent tariffs, his auto levies build on a government investigation completed in 2019.

The probe found that excessive imports were weakening the internal economy and might impair national security.

(A.Lehmann--BBZ)