President Trump announced on Wednesday that he will impose 25% tariffs on non-US made automobiles, increasing further tensions on trade wars before the main deadline for tariffs is set to hit on April 2nd.
This is when tariffs are expected to hit imported goods of major US trading partners. The newly announced tariffs on imported cars and light trucks are expected to be in motion on April 3rd.
This follows earlier tariffs on steel, aluminum, and goods from China, Mexico, and Canada, some tied to issues like fentanyl trafficking. Reports indicate the upcoming April 2nd reciprocal tariffs—aimed at countries with trade imbalances—may be narrower than initially threatened, with potential exemptions for some nations.
Leaders like Canada’s Mark Carney and Germany’s Robert Habeck have criticized the move, warning of economic harm and pledging retaliation.
Trump’s Plan, Market Reactions and Tesla Implications
In an effort to boost American manufacturing, President Trump declared during the announcement of these tariffs that no duties would be imposed on automobiles made in the United States. ⁽¹⁾
Will Scharf, a White House official, explained that the tariffs target light trucks and vehicles built abroad, which are expected to generate over $100 billion in US revenue annually.
Though details are still unknown, Trump has promised “very strong policing,” which begs the question of enforcement given the intricacy of global supply chains, where automobiles are made up of parts from several nations. ⁽²⁾
Trump’s tariffs offer a temporary reprieve to the “Big Three” (General Motors, Stellantis, Ford) under a one-month USMCA compliance exemption from March 5, However, GM and Ford experienced major declines in price after the announcement. ⁽³⁾
Tesla shares fell almost 6% on March 26 as data from Europe showed slowing sales last month, and investors grew increasingly concerned about President Donald Trump’s plan for tariffs. ⁽⁴⁾
The European Automobile Manufacturers’ Association (ACEA) revealed on Tuesday that Tesla saw a 40% year-over-year drop in new vehicle registrations in Europe in February. ⁽⁵⁾
New car buyers in Europe could be holding out for the Model Y refresh or a new affordable model, where Tesla is set to fully ramp up production of the redesigned version of its Model Y SUV next month. The company implemented partial production shutdowns at certain factories earlier this year to upgrade Model Y manufacturing line. ⁽⁶⁾
US Car Imports and Reactions from Global Leaders
In 2024, the US imported around $700 billion in both car parts and vehicles, imported from Mexico, Japan, South Korea, Canada and Germany. Now, these tariffs are likely to pressure relationships between the US and its trading partners. ⁽⁷⁾
European Commission President von der Leyem spoke against the tariffs, calling them bad for businesses and consumers. Her statement highlights the increased costs and reductions in competition in both the US and EU regions.
Canadian Prime Minister Carney labeled the tariffs as a direct attack on Canadian workers, which might lead to retaliatory effects, which could increase tensions between the US and Canada. ⁽⁸⁾
German Economy Minister Robert Habeck urged the EU to adopt a “decisive response,” saying the tariffs were detrimental to both the US and EU economies. His appeal for firmness reflects the urgency felt by Germany, a major auto exporter to the US. ⁽⁹⁾
According to Habeck’s statement, the US will face retaliation, with these tariffs harming German manufacturers and the EU economy overall. This viewpoint supports industry concerns about rising consumer costs and interrupted trade flows.
