Trump announces 25% tariffs on foreign-built vehicles

US President Donald Trump has announced steep tariffs on auto imports and parts, provoking threats of retaliation from trading partners ahead of further promised trade levies next week.

As Asian markets opened Thursday, shares in carmakers were down sharply. Japan's government described the Washington move as "extremely regrettable," while Prime Minister Shigeru Ishiba said Tokyo was "considering all kinds of countermeasures."

"What we're going to be doing is a 25 percent tariff on all cars that are not made in the United States," Trump said, as he signed the order in the Oval Office.

The duties take effect at 12:01 am (0401 GMT) on April 3 and impact foreign-made cars and light trucks. Key automobile parts will also be hit within the month.

Canadian Prime Minister Mark Carney branded Trump's tariffs a "direct attack" on his country's workers. He said that the cabinet would meet Thursday to discuss retaliation.

Peter Navarro, Trump's senior counselor for trade and manufacturing, in a briefing after Trump's announcement blasted "foreign trade cheaters" who he said turned America's manufacturing sector into a "lower wage assembly operation for foreign parts."

He took aim at Germany and Japan for reserving the construction of higher-value parts to their countries.

Since returning to the presidency in January, Trump has imposed fresh tariffs on imports from major US trading partners Canada, Mexico and China -- alongside a 25 percent duty on steel and aluminum.

The latest levies will be in addition to those already in place for products.

But the White House added that vehicles entering under the US-Mexico-Canada Agreement (USMCA) can qualify for a lower rate depending on their American content.

Similarly, USMCA-compliant auto parts will remain tariff-free as officials establish a process to target their non-US content.

- 'Devastating impact' -

Uncertainty over Trump's trade plans and worries they could trigger a downturn have roiled financial markets, with consumer confidence also falling in recent months amid fears of the tariffs' effects.

Wall Street slumped ahead of Trump's Wednesday afternoon announcement, with shares in General Motors down 3.1 percent although Ford eked out a 0.1 percent gain.

On Thursday in Japan, the world's top-selling automaker Toyota was down almost 3.5 percent, while Nissan shed 2.5 percent and Honda fell as much as 3.1 percent. Mitsubishi Motors decreased 4.5 percent, while Mazda dropped 5.9 percent and Subaru tumbled 6.1 percent.

In South Korea, Hyundai shares dipped 2.7 percent.

Trump has defended the levies as a way to raise government revenue and revitalize American industry.

But targeting imported cars could strain ties with countries like Japan, South Korea, Canada, Mexico and Germany -- which are close US partners.

"Imposing 25 percent tariffs on imported cars will have a devastating impact on many of our close trading partners," said Wendy Cutler, vice president at the Asia Society Policy Institute and a former US trade negotiator.

She added that Washington has free trade agreements with some affected parties, "calling into question the value of US commitments" under a trade deal.

About 50 percent of cars sold in the United States are manufactured within the country. Among imports, about half come from Mexico and Canada, with Japan, South Korea and Germany also being major suppliers.

And of the US-made cars, more than half were assembled from foreign parts, said a White House official.

The American Automotive Policy Council representing Detroit's "Big Three" automakers -- Ford, General Motors and Stellantis -- issued a carefully worded statement on the tariffs, saying it hoped the policy would boost US auto production.

But it stressed: "It is critical that tariffs are implemented in a way that avoids raising prices for consumers."

The Center for Automotive Research has previously estimated that US tariffs –- including those on metals and imported autos –- could increase the price of a car by thousands of dollars and weigh on the jobs market.

- 'Liberation Day' -

Besides the automobile industry, Trump is also eyeing sector-specific tariffs, such as on pharmaceuticals, semiconductors and lumber.

Wednesday's announcement comes ahead of April 2, which Trump has dubbed "Liberation Day" for the world's biggest economy.

He has promised reciprocal levies, tailored to different trading partners to remedy practices that Washington deemed unfair. On Wednesday he said these duties will impact all countries.

While Trump has invoked emergency economic powers for some recent tariffs, his auto levies build on a government investigation completed in 2019.

The probe found that excessive imports were weakening the internal economy and might impair national security.

'Direct attack'

Canadian Prime Minister Mark Carney reacted with anger Wednesday to US President Donald Trump's imposition of import tariffs on cars, branding it a "direct attack" on his country's workers.

"We will defend our workers. We'll defend our companies. We'll defend our country. And we'll defend it together," said Carney, who has made standing up to Trump the foundation of his campaign for the April 28 elections.

"This will hurt us, but through this period, by being together, we will emerge stronger," he said in an address.

"We've announced, of course, retaliatory tariffs. We have other options for those retaliatory tariffs," he said, adding that he had convened a meeting of Canadian officials on Thursday "to discuss our trade options."

Shortly beforehand, Trump had announced a permanent 25 percent import tariff on all cars and light trucks not made in the United States.

About 50 percent of cars sold in the United States are manufactured within the country.

Among imports, about half come from Mexico and Canada, which have highly integrated supply chains with US industry under a trilateral free trade agreement.

Trump previously imposed tariffs on the two countries, but had offered automakers a temporary reprieve.

Carney was speaking after a meeting with autoworkers and labor leaders, and promised that any funds raised from Canada's retaliatory tariffs would be used to support their jobs.

"This is a direct attack, to be clear, a direct attack on the very workers that I stood in front of ... this morning at the Ambassador Bridge," which connects the Canadian city of Windsor to Detroit, renowned as the hub of the US auto industry.

Carney said the bridge "is a symbol and a reality up until now of the tight ties between our two countries, ties of kinship, ties of commerce, ties that are in the process of being broken."

'Significant impact'

Japan's government warned Thursday of a "significant impact" on its economic ties with the United States -- and on global trade -- after President Donald Trump announced import tariffs on cars.

Tokyo is a close economic and strategic US ally, with its firms the biggest investors in the United States and one in 10 Japanese jobs connected to the auto sector.

Trump announced on Wednesday 25 percent tariffs "on all cars that are not made in the United States" effective 12:01 am (0401 GMT) eastern time on April 3.

Prime Minister Shigeru Ishiba, who last month held friendly talks with Trump at the White House, said Japan was reviewing an "appropriate" response.

"Japan has made significant investments and significant job creation, which doesn't apply to all countries... We are the number one (country) in investment in the United States," Ishiba added.

"The US president's understanding on this is significantly deepening. However, various things are happening, so we are considering all kinds of countermeasures," he said.

Chief government spokesman Yoshimasa Hayashi went further, calling the tariffs "extremely regrettable" and warning of major effects.

"We believe that the current measures and other broad-based trade restrictions by the US government could have a significant impact on the economic relationship between Japan and the US, as well as on the global economy and the multilateral trading system," Hayashi told reporters.

"In response to this announcement, we have again told the US government that this measure was extremely regrettable and we strongly urged the US government to exclude Japan from the scope of this measure," Hayashi said.

Trump's announcement hammered carmakers in Asia.

The world's top-selling automaker Toyota at midday was down 2.7 percent, while Nissan shed 2.6 percent and Honda was off 2.7 percent.

In South Korea, Hyundai shares dipped 4.0 percent.

Contacted by AFP, Toyota was not immediately available for comment on Thursday.

A Honda spokesman told AFP: "We need to study the impact of the tariffs on our businesses, then we will take measures to minimise the impact."

The auto industry is a huge pillar of the Japanese economy, with vehicles accounting for roughly a third of Japan's 21.3 trillion yen ($142 billion) of US-bound exports in 2024.

Earlier in March, the chair of the Japan Automobile Manufacturers Association (JAMA) warned of fallout from US trade protectionism.

A 25 percent tariff "would have a negative impact overall on the economies of the United States and Japan", Masanori Katayama said.

- US-Japan ties -

Japanese ministers have been lobbying their US counterparts to secure tariff exemptions for goods like steel and vehicles, but these requests have been denied.

The Trump administration says levies will raise government revenue, revitalise American industry and press countries on US priorities.

But targeting imported cars could strain ties with close US partners.

About 50 percent of cars sold in the United States are manufactured within the country. Among imports, about half come from Mexico and Canada, with Japan, South Korea and Germany also major suppliers.

Deputy Foreign Minister Takehiro Funakoshi spoke on Thursday morning with US counterpart Thomas Landau and "conveyed Japan's position regarding the tariff measures", the government said.

"The two sides concurred to continue working closely together to elevate the Japan-US Alliance to new heights and to realize a free and open Indo-Pacific based on the rule of law, building upon the outcomes of the Japan-US Summit Meeting in February," a statement added.

US Defense Secretary Pete Hegseth is due to hold talks with Japanese counterpart Gen Nakatani in Tokyo on Sunday.

Brazil 'cannot stand still'

Brazil's President Luiz Inacio Lula da Silva told reporters in Tokyo on Thursday that his country "cannot stand still" in response to US President Donald Trump's trade tariffs.

The South American powerhouse is the second-largest exporter of steel to the United States after Canada, shipping four million tonnes of the metal in 2024.

In February, Lula vowed "reciprocity" in response to a 25 percent levy on steel imports announced by Trump.

But after the policy came into effect on March 12, the Brazilian finance minister said Lula had decided not to retaliate and instead called for "calm".

On Thursday, the last day of a state visit to Japan, Lula said Trump needs to "measure the consequences" of his tariffs on the United States, such as inflation.

"We are going to take the approach that we think will be good for Brazil," he said.

"We have two options: one is to resort to the World Trade Organization, which we are going to do, and the other is to overtax the American products that we import -- that is, to put the law of reciprocity into practice," he said.

"We cannot stand still believing that only they are right and that only they can tax other products."

Lula, 79, had said on Wednesday that he expects talks between South America's Mercosur bloc and Japan on a trade deal to begin in the second half of the year.

Lula has portrayed such an agreement as a way for the two economies to boost trade in the face of growing protectionism under Trump.

Four Mercosur members -- Argentina, Brazil, Paraguay and Uruguay -- in December struck a free-trade deal with the European Union although it still faces hurdles before final approval.

On Thursday, Lula also reacted to Brazil's Supreme Court ordering far-right former president Jair Bolsonaro to stand trial on charges of plotting a coup.

"I only hope that justice is served. If he (Bolsonaro) is found innocent in the proceedings, let him be declared innocent. If he is guilty, let him be punished," Lula said.

"He has no way of proving that he is innocent," Lula said. "Everyone knows what he did."