US President Donald Trump has imposed 25 per cent tariff on automobile imports in a bid to bolster domestic manufacturing and generate $100 billion annually.
"This will continue to spur growth," Trump said. "This is permanent." The tariffs are expected to bring down the budget deficit besides supporting domestic manufacturers.
The tariff, will take effect from April 2, is expected to impact car makers exporting vehicles to the US as the sales could dwindle amid rising prices.
The US imported around 80 lakh cars and light trucks worth $244 billion in 2024, with top exporting nations being Mexico, South Korea, Japan, Canada and Germany. The import of auto parts were valued at $197 million and the key exporters in this category were Mexico, Canada and China. The tariffs on auto parts are expected to happen in May.
While domestic manufacturers stand to benefit from the tariffs, the middle class consumers in the US are likely to bear the brunt if the foreign car makers pass the duty burden to the customers by increasing prices of imported vehicles by $4,000 to $12,500.
However, Trump claims that the tariff move would push foreign car makers to manufacture locally and thereby creating jobs. "If you build your car in the United States there is no tariff," Trump said.
Calling the tariffs a "direct attack" on his country Canada's new Prime Minister Mark Carney said he will protect Canadian car manufacturers. "This will hurt us, but through this period by being together we will emerge stronger," he said.
The UK is hoping to negotiate a trade deal with the US before the tariffs come into effect.
European Commission president Ursula von der Leyen said the EU will try to negotiate with the US while "safeguarding its economic interests."
Japanese premier Shigeru Ishiba said he will put "all options on the table" following Trump's announcement. His statement comes amid shares of Toyota, Nissan and Honda slumped in early trade in Tokyo.