Donald Trump has said he is placing 25% tariffs on motor imports, a move the White House claims will foster domestic manufacturing but could also put a financial squeeze on car makers that depend on global supply chains.
“This will continue to spur growth,” the president told reporters. “We’ll effectively be charging a 25% tariff.”
The tariffs could be complicated as even US car makers source their components from around the world, meaning that they could face higher costs and lower sales. Shares in General Motors fell by about 3% in Wednesday afternoon trading. Ford’s stock was up slightly, but shares in Stellantis, the owner of Jeep and Chrysler, dropped nearly 4%.
Mr Trump has long said that tariffs against car imports would be a defining policy of his presidency, betting that the costs created by the taxes would cause more production to relocate to the US.
But American and foreign firms with domestic plants still depend on Canada, Mexico and other nations for parts and finished vehicles, meaning prices could increase and sales could decline as new factories take time to build.
“We are going to be doing automobiles, which you’ve known about for a long time,” Mr Trump said on Monday. “We’ll be announcing that fairly soon, over the next few days probably.”
The tariffs are part of a broader reshaping of global relations by Mr Trump, who plans to impose what he calls “reciprocal” taxes on April 2 that would match the tariffs and sales taxes charged by other nations.
He has already placed a 20% tax on all imports from China for its role in the production of fentanyl. He similarly placed 25% tariffs on Mexico and Canada, with a lower 10% tax on Canadian energy products.
Parts of the Mexico and Canada tariffs have been suspended, including taxes on cars, after firms objected and Mr Trump responded by giving them a 30-day reprieve which is set to expire in April.
The president has also imposed 25% tariffs on all steel and aluminium imports, removing the exemptions from his earlier 2018 taxes on the metals. He also plans tariffs on computer chips, pharmaceutical drugs, lumber and copper.
His taxes risk igniting a broader global trade war with escalating retaliations that could crush global trade, potentially damaging economic growth while raising prices for families and businesses as some of the costs of the taxes get passed along by importers.
When the European Union retaliated with plans for a 50% tariff on US spirits, Mr Trump responded by planning a 200% tax on alcoholic beverages from the EU.
He also intends to place a 25% tariff on countries that import oil from Venezuela, even though the US also imports oil from that nation.
Mr Trump’s aides maintain that the tariffs on Canada and Mexico are about stopping illegal immigration and drug smuggling, but the administration also wants to use the tariff revenues to lower the budget deficit and assert America’s pre-eminence as the world’s largest economy.
The president on Monday cited plans by South Korean car maker Hyundai to build a 5.8 billion dollar (£4.5 billion) steel plant in Louisiana as evidence that tariffs will bring back manufacturing jobs.
Slightly more than a million people are employed domestically in the manufacturing of motor vehicles and parts, about 320,000 fewer than in 2000, according to the Bureau of Labour Statistics. Another 2.1 million people work at auto and parts dealerships.
The US last year imported nearly eight million cars and light trucks worth 244 billion dollars (£189 billion). Mexico, Japan and South Korea were the top sources of foreign vehicles.
Imports of car parts came to more than 197 billion dollars (£153 billion), led by Mexico, Canada and China, according to the Commerce Department.