Donald Trump signs 25% tariffs on imported cars and components

The warning had been there for some time, and it has now been carried out. Donald Trump, President of the United States of America (USA), signed an executive order yesterday imposing tariffs on all cars and automotive parts imported into the country.

The new 25% tariff is due to take effect on 3 April for imported cars. For certain automotive parts - including engines, transmissions, other drivetrain components and electrical parts - the measure will apply from 3 May.

According to the White House, the purpose of these tariffs is to strengthen domestic car production and encourage manufacturers to move vehicle production to the USA.

Industry leaders and analysts, however, warn that tariffs as wide-ranging as these could produce the opposite result: cuts to production on US soil and price rises of several thousand dollars for cars.

The concern is that even vehicles assembled in the USA rely on parts manufactured elsewhere in the world, meaning they too would be affected by the new customs duties.

“This will continue to generate growth like never seen before.”

Donald Trump, President of the USA

For now, parts that comply with the USMCA trade agreement (between the USA, Canada and Mexico) will not be covered by the new tariffs. That could change later, once the US Department of Commerce sets out a process to determine the non-American content of those same parts.

EU and Canada oppose car tariffs

European Commission President Ursula von der Leyen responded shortly after the White House announced the 25% tariff on imported cars. In a statement, von der Leyen said she regretted the US decision.

“As I have said before, tariffs are taxes - bad for business, worse for consumers in the USA and in the European Union alike.”

Ursula von der Leyen, President of the European Commission

She added that the Commission will now assess the impact of the announcement, and that the European Union will continue to “seek negotiated solutions, while safeguarding its economic interests”. She also said the 27 Member States will, together, “continue to protect our workers, businesses and consumers”.

Canada, the USA’s neighbour, delivered a sharper criticism through its Prime Minister, Mark Carney: “It’s a direct attack.” He also said the decision is unjustified and that he needs to review Trump’s signed executive order in more detail before taking retaliatory steps.

Carney, who was sworn in only on 14 March, also noted that Canada’s automotive industry accounts for 125,000 direct jobs and 500,000 indirect jobs, and said he has already arranged a telephone call with Trump.

What does the European car industry say?

ACEA (the European Automobile Manufacturers’ Association) also issued a statement, saying it is “deeply concerned” by the automotive tariffs announced by Donald Trump.

“European manufacturers have invested in the USA for decades, creating jobs, driving economic growth in local communities, and generating massive tax revenues for the US government.”

Sigrid de Vries, Director General of ACEA

Sigrid de Vries urged President Trump to “consider the negative impact of tariffs not only on global manufacturers but also on American domestic production”.

ACEA also underlined that European manufacturers export between 50% and 60% of the vehicles they build in the USA, which, the statement says, contributes positively to the US trade balance.

“The EU and the USA must engage in dialogue to find an immediate resolution to avoid tariffs and the damaging consequences of a trade war”.

ACEA statement

Unions in favour

Against the prevailing criticism of the US tariffs on imported cars, the UAW (United Auto Workers) - the most widely represented union in the US automotive sector - welcomed the move.

“It’s a win for workers in the industry,” the union said in a statement, arguing that the decision will bring an end to a “harmful economic model”.

“We applaud the Trump administration for taking action to end the free trade disaster that has devastated working class communities for decades. The Trump administration has made history with today’s actions.”

Shawn Fain, President of the UAW

The UAW went further, sending a message directly to carmakers: it said manufacturers should absorb the full additional costs created by the tariffs rather than passing them on to customers, and that it would support legislation requiring them to do so.

Finally, it also warned that “workers must be protected from any disruption that accompanies the reshoring (industrial) process, with financial support from the federal government if necessary”.

Updated at 12:30 - ACEA’s reaction was added.