Global automakers are bracing for severe financial strain as U.S. President Donald Trump prepares to impose a 25% tariff on imported cars, a move experts say could disrupt global supply chains, increase prices for American consumers, and trigger retaliatory measures from trade partners.
The tariffs, set to take effect on April 3, target both imported vehicles and auto parts, which were valued at $197 billion last year, UNB reports.
While the Trump administration argues the measures will boost domestic manufacturing and create jobs, industry experts and policymakers warn of significant economic fallout.
Global Impact and Industry Concerns
Automakers across Japan, South Korea, Mexico, Canada, and Europe employ millions of workers who depend on U.S. buyers, who collectively spend over $240 billion annually on imported cars and light trucks.
“The impact will be really huge and very disruptive,” said Sigrid de Vries, director general of the European Automobile Manufacturers’ Association. She and other critics argue that American car shoppers will face higher prices as costs rise.
The tariffs have already affected global stock markets, with major automakers such as Toyota, Mercedes-Benz, Kia, and BMW seeing their shares decline.
Even U.S. automakers, which export only 2% of their production to the European Union, saw stocks fall due to their reliance on cross-border auto parts trade—though Tesla’s stock price rose as the company relies less on foreign supply chains.
Retaliation and Trade Tensions
Governments around the world are weighing countermeasures. The European Union, which counts the U.S. as its largest auto export market, is considering re-imposing tariffs on American goods such as jeans, bourbon, and motorcycles.
“We have our plans ready,” said EU foreign affairs representative Kaja Kallas, though she noted that negotiations could still prevent a trade war.
Japanese Prime Minister Shigeru Ishiba urged Trump to exempt Japanese automakers, while Canada’s Prime Minister Mark Carney vowed to protect his country’s auto industry. Canadian union leader Lana Payne called for retaliation, stating, “If U.S. automakers want to sell in Canada, they should be required to build in Canada.”
Economic Fallout and Uncertainty
Economists warn the tariffs could backfire, driving up costs for American consumers and potentially reducing overall trade.
“There’s a risk of retaliatory tariffs and then a tit-for-tat, and then we end up with significant barriers to trade and we all lose out,” said David Bailey, a business economics professor at the University of Birmingham.
Analysts at Sanford C. Bernstein estimate that if the tariffs remain long-term, they could add up to $12,000 per imported vehicle in the U.S., though automakers will decide whether to pass on the full cost to consumers or absorb some of the losses.
Despite Trump’s claim that the tariffs are “permanent,” industry observers believe they may not last, as previous trade disputes—such as the U.S.-China auto tariff escalation in 2018—were short-lived due to economic pressures.
European automakers, already struggling with a shrinking domestic market and rising competition from Chinese electric vehicle makers, now face an additional challenge.
“This would deliver a substantial blow to a sector that not only sustains millions of jobs but also contributes to a large proportion of the bloc’s GDP,” said Clarissa Hahn, an analyst at Oxford Economics.
As the April 3 deadline approaches, the global auto industry remains on edge, awaiting potential negotiations or countermeasures from affected nations.
