President Trump said he would impose a 25% tariff on global auto imports into the U.S., making good on his pledge to sanction foreign car and truck manufacturers.

"What we're going to do is we're going to put a 25% tariff on all cars that are not made in the U.S.," Trump said Wednesday in the Oval Office, appearing to rule out possible exemptions for countries such as Canada and Mexico, which have free-trade agreements with the U.S.

The U.S. will begin imposing auto tariffs on April 3, Trump said, a day after he announced a broader set of trade actions. The so-called reciprocal tariffs, scheduled for that day, were originally intended to match U.S. tariffs with those imposed by foreign countries, but Trump said Wednesday that the tariffs he plans to impose will likely be lower than that. The tariffs would cover finished cars and auto parts, a senior administration official said. The administration has considered exempting auto parts from the tariffs. However, parts that comply with the U.S.-Mexico-Canada Agreement will remain tariff-free until the Commerce Department "establishes a process to apply tariffs to non-U.S. content," White House deputy press secretary Harrison Fields wrote online.

The 25% tariff would be added on top of existing tariffs, including the 2.5% tariff currently imposed by the U.S. and the existing 25% tariff on light trucks, known as the chicken tax, the senior administration official said. The tariffs would be added on top of 25% tariffs on Canadian and Mexican goods that Trump has imposed because he says those countries are not doing enough to stop the illegal fentanyl trade. Negotiations on the tariffs are ongoing.

Canadian Prime Minister Mark Carney called the tariffs a direct attack on Canadian workers. He said Canadian officials would decide what action to take, including possible retaliatory tariffs, after seeing the language of Trump's executive order.

"It's clear that this is a violation and a betrayal of our trade agreements," said Carney, who is just beginning an election campaign that will culminate in a vote on April 28.

Nearly half of all new passenger vehicles sold in the U.S. in 2024 will be assembled outside the U.S., according to data from S&P Global Mobility. Mexico is the largest exporter of cars to the U.S., shipping pickup trucks from General Motors, Ram and Toyota as well as affordable sedans from Nissan and luxury models from BMW and Audi from Volkswagen.

Popular mass-market vehicles such as Toyota's RAV4 and Honda's Civic are also imported from Canada for sale in the U.S.

Autos Drive America, a trade group representing foreign automakers with operations in the U.S., including Toyota, Volkswagen, Honda and Hyundai, said the tariffs would make cars even less affordable after significant price increases since the start of the pandemic.

GM shares fell 8% after hours on Wednesday, while Ford Motor fell 5% and Jeep and Ram parent Stellantis fell 5%. Tesla, which makes electric vehicles sold domestically in the U.S., rose about 1%. Trump's previously proposed 25% tariffs on Canada and Mexico would add about $6,000 to the cost of vehicles assembled in those countries, assuming parts are included in the levy, Cox Automotive said. "The bottom line: lower production, tighter supply, and higher prices are on the horizon," said Cox Automotive chief economist Jonathan Smoke. Trump's team has swung between a maximalist approach to tariffs and offers of potential relief to companies and trading partners. Trump initially said he would impose sector-specific tariffs on industries such as semiconductors, lumber and pharmaceuticals on April 2. But he reiterated Wednesday that those industry-specific tariffs would not happen on that date, though they could be announced later. Trump said the reciprocal tariffs would be "lower than [trading partners] have imposed on us for decades." Trump also said the reciprocal tariffs would target "all countries," rather than just the 15% that Treasury Secretary Scott Bessent has said could be prioritized in the April 2 action. The president reiterated a campaign pledge to boost auto demand, saying he was working with House Speaker Mike Johnson to pass a measure that would allow consumers to deduct auto interest payments from their income taxes on American-made cars. United Auto Workers President Shawn Fain said(Newsmaker23)

Source: Dow Jones Newswires