President Donald Trump is going after the international auto industry. Trump on Wednesday said he would impose 25% tariffs on “all cars that are not made in the United States.”
Trump added that there is “absolutely no tariff” for cars that are built in the U.S.
The new tariffs will be going into effect on April 2. They were reportedly codified in a presidential proclamation that Trump signed in the Oval Office.
READ: The perils of Trump’s proposed tariff trade war (February 6, 2025)
Imposing tariffs on cars made in the EU and Canada by the U.S. could lead to higher prices for consumers, as automakers would likely pass on the added costs from the tariffs. This could strain U.S.-based automakers who rely on imported parts, disrupting supply chains and raising production costs.
Additionally, retaliatory tariffs from the EU and Canada might escalate trade tensions, potentially affecting other industries and global relations. The uncertainty could also lead to volatility in stock markets, as investors react to potential disruptions in the automotive sector and broader international trade.
Trump’s White House aide Will Scharf said that the new tariffs would apply to foreign-made cars and light trucks. He also added a clarification that these new tariffs came in addition to duties that are already in place.
European Commission President Ursula von der Leyen quickly criticized the new U.S. tariffs and vowed that the European Union “will continue to seek negotiated solutions, while safeguarding its economic interests.”
These tariffs were announced on the heels of Trump warning the European Union and Canada that he would strike them with large tariffs if they tried to economically harm the United States.
Just this week, South Korean automaker Hyundai announced that it would be investing roughly $21 billion in U.S. domestic manufacturing and opened its new $7.6 billion electric vehicle factory in Georgia on Wednesday by announcing plans to expand its production capacity by two-thirds to a total of 500,000 vehicles per year as Trump announced the tariffs.
What is the contribution of the EU and Canadian auto industries to the US economy?
The EU and Canadian auto industries play a significant role in the U.S. economy, contributing to manufacturing, trade, and employment. Many European and Canadian automakers have production plants in the U.S., including companies like Volkswagen, BMW, Mercedes-Benz, and Toyota, which manufacture vehicles and parts domestically. This helps strengthen the U.S. automotive supply chain and creates jobs.
READ: Canada, China, Mexico, South Korea, India among 10 countries to be hit by Trump’s tariffs on aluminum, steel (February 11, 2025)
Additionally, Canada is a major exporter of vehicles to the U.S. with over $16 billion worth of vehicles shipped in 2020. European automakers also export a large number of vehicles and automotive parts. These industries support not only trade but also manufacturing jobs, with hundreds of thousands of U.S. workers employed in factories, research, and distribution.
The U.S. automotive industry is closely tied to European and Canadian companies, and any disruptions in these relationships—such as through tariffs—could have wide-reaching effects on the U.S. economy, including higher prices and potential supply chain disruptions.