The President's announcement Donald Trump to impose 25% tariffs on all imports of cars and auto parts to the United States sent shock waves through the American auto industry as well as its global competitors.
Applying these new duties over a long period of time risks increasing the price of a mid-range American car by several thousand dollars, while disrupting all auto production in North America.
This is due to the increasing integration of production processes between automakers in Canada, Mexico and the United States over more than three decades.
According to data from research firm GlobalData, nearly half of the cars sold in the United States last year were imported.
Following the announcement, General Motors shares fell 8% in after-hours trading. U.S.-listed shares of Ford and Stellantis were down about 4,5% each. In Asia, shares of Toyota Motor, Honda Motor, and Hyundai Motor fell 3% to 4%.
Shares of Tesla, which manufactures all vehicles sold in the United States locally but imports some parts, fell 1,3%.
Trump said the tariffs announced Wednesday could hurt Tesla… or perhaps benefit it. He added that Tesla CEO and close ally, Elon Musk, had not given him any advice regarding these new tariff measures.
In a post on the social network X following this announcement, Musk acknowledged that the tariffs would have an impact on Tesla. In another message, he clarified: "This will affect the price of imported spare parts for Tesla cars..." "The impact on costs is not negligible."
Trump's tariffs and repeated threats since the start of his second term have created major uncertainty for businesses and disrupted global markets. On Wednesday, he again claimed that these taxes would encourage manufacturers to invest more in the United States rather than in Canada or Mexico.
The Auto Drive America group, representing major foreign manufacturers such as Honda, Hyundai, Toyota and Volkswagen, said:
"The tariffs imposed today will increase the cost of producing and selling cars in the United States, which will inevitably lead to higher prices, less choice for consumers, and fewer jobs in the American manufacturing sector."
North American automakers have enjoyed free trade since 1994. The 2020 agreement between the United States, Mexico, and Canada, spearheaded by Trump, introduced new rules to encourage regional component manufacturing.
After imposing 25% tariffs on imports from Mexico and Canada in early March, Trump granted a one-month grace period for cars produced under the terms of the agreement, which temporarily benefited American companies. However, the new rules do not provide for an extension of this period.
The White House announced that 25% tariffs on auto parts will take effect no later than May 3. These taxes will target key products such as engines, transmissions, drivetrain parts, and electrical components.
The White House added that car importers under the United States-Mexico-Canada Agreement will have the option to certify their locally manufactured components so that duties apply only to non-U.S. parts.
Even before the announcement, the specialist company Cox Automotive had estimated that this measure could add $3 to the cost of a vehicle manufactured in the United States, and up to $000 for those produced in Canada or Mexico.
If the duties are implemented, Cox predicts a near-total disruption to North American auto production by mid-April, resulting in a production drop of 20 vehicles per day, or about 000%.
The United Auto Workers union, which represents workers at Detroit's Big Three automakers, welcomed Trump's decision.
"Thanks to these tariffs, thousands of good-paying auto jobs could be restored to working-class Americans in the coming months," union president Shawn Fain said in a statement.
