US President Donald Trump has slapped new 25% import duties on autos and car parts entering the US, threatening to escalate the global trade war.
Trump said the additional duties would go into effect on April 2, with levies on businesses importing autos beginning the next day. Charges for parts are scheduled to begin in May or later.
The president stated that the proposal would result in “tremendous growth” for the auto industry, saying that it would boost jobs and investment in the United States.
However, analysts believe the measure will result in a temporary stoppage of significant US vehicle production, higher costs, and strained relations with allies.
Last year, the US imported approximately eight million cars, accounting for approximately $240 billion (£186 billion) in trade and roughly half of total sales.
Mexico is the top foreign supplier of cars to the US, followed by South Korea, Japan, Canada, and Germany.
Trump’s latest move could disrupt global car trade and supply chains. Many US car companies have operations in Mexico and Canada under the terms of the long-standing free trade agreement.
However, the new taxes on parts from Canada and Mexico are exempt until US Customs and Border Patrol establish a method to assess the duties, according to the White House. Every day, billions of dollars in goods cross borders between neighbouring countries.
On Wednesday, General Motors’ stock fell almost 3%. The sell-off spread to other firms, including Ford, following the president’s speech that reaffirmed the tariffs.
When asked during a news conference if there was any chance he would change his mind, Trump responded no, later adding, “This is permanent.”
“If you build your car in the United States there is no tariff,” he said.
Japanese Prime Minister Shigeru Ishiba stated that his government would consider all measures in reaction to the taxes.
Japan, home to several major automakers, is the world’s second-largest vehicle exporter.
Japanese automakers’ shares, including Toyota, Nissan, and Honda, sank in early trading in Tokyo.
A tariff is a levy on imports levied by the government and paid by the company importing the goods.
Trump has welcomed the instrument, intending to use it to target a wide range of imported goods as part of a larger effort to defend American industries and increase production.
However, while the rules can protect domestic industries, they also increase costs for businesses that rely on imported parts, such as carmakers.
According to the Anderson Economic Group, 25% tariffs on parts from Mexico and Canada alone could increase the cost of a car by $4,000 to $10,000, depending on the type.
