Trump's auto tariffs spark global outcry as price hikes loom

by Beiyi SEOW and Danny KEMP

World powers on Thursday blasted US President Donald Trump's steep tariffs on imported vehicles and parts, vowing retaliation as trade tensions intensify and price hikes appear on the horizon.

Major car exporter Germany urged a firm response from the European Union, while Japan said it "will consider all options."

Canadian Prime Minister Mark Carney said Thursday that the "old relationship" of deep economic, security and military ties with Washington "is over," adding that he expected to speak with Trump in the next day or two.

The 25 percent US duties, which take effect on April 3 at 12:01 am (0401 GMT), impact foreign-made cars, light trucks and vehicle parts.

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Experts warn of higher vehicle costs, and Italian carmaker Ferrari said it would raise prices on many models sold to the United States by up to 10 percent from next week.

Global stock markets plummeted with automakers like Toyota, Hyundai and Mercedes at the forefront of the plunge. In New York, shares in General Motors tumbled while Ford and Stellantis also fell.

French Finance Minister Eric Lombard said the only solution for the European Union is to "raise tariffs on American products in response."

Carney, who earlier called the tariffs a "direct attack" on his country, said he convened a meeting to discuss trade options, while Mexico's Economy Minister Marcelo Ebrard said he would seek "preferential treatment" for his country.

Trump ramped up his threats overnight, saying on social media that Canada and the EU could face "far larger" surcharges if they worked together "to do economic harm to the USA."

- Price surge -

JPMorgan analysts estimate the tariffs on autos and parts could cause a $4,000 to $5,300 increase in average car prices.

It said around 82 percent of Ford's US sales are produced domestically, with the corresponding figures for Stellantis at 71 percent and General Motors at 53 percent.

The American Automotive Policy Council representing the big three automakers warned tariffs must be implemented in a way that "avoids raising prices for consumers" and preserves the industry's competitiveness.

Canadian Vehicle Manufacturers' Association president Brian Kingston said the measures would bring higher costs for producers and consumers, alongside "a less competitive industry."

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

- 'Cheaters' -

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

The White House estimates that of the US-made cars, their average domestic content is likely around 40 percent.

Top Trump trade aide Peter Navarro on Wednesday blasted "foreign trade cheaters" who he said turned the US manufacturing sector into a "lower wage assembly operation for foreign parts."

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

Since returning to the presidency in January, Trump has imposed tariffs on imports from major trading partners Canada, Mexico and China -- alongside a 25 percent duty on steel and aluminum.

The latest levies add to those already in place for autos.

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

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

Mexican President Claudia Sheinbaum said tariffs were contrary to the North American trade deal, but said her country would wait until early April before responding.

- 'Devastating impact' -

Uncertainty over Trump's trade plans and worries they could trigger a downturn have roiled financial markets, as consumer confidence slips.

Trump has defended tariffs as a way to raise government revenue and revitalize US industry.

Targeting imported cars could strain ties with Washington's allies, however.

"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.

Besides automobiles, Trump is considering other sector-specific tariffs, including on pharmaceuticals, semiconductors and lumber.

He has promised a "Liberation Day" on April 2, when he is set to unveil reciprocal levies, tailored to different trading partners, to address practices deemed unfair.