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Home » Global Automakers React to Trump’s 25% Tariff on Imported Cars

Global Automakers React to Trump’s 25% Tariff on Imported Cars

March 27, 20256 Mins Read Business
Global Automakers React to Trump’s 25% Tariff on Imported Cars
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Mexico deployed thousands of National Guard troops to the border to deter migrants from reaching the United States. South Korea said it would invest $21 billion in expanding U.S. manufacturing. Japanese officials descended on Washington, offering to invest $1 trillion in the United States and buy more American natural gas.

None of that was enough to prevent one of those countries’ biggest tariff concerns from becoming a reality on Wednesday, when President Trump declared that automobiles and car parts imported to the United States would face a 25 percent tariff starting on April 3.

Mexico, Japan and South Korea, along with Canada, account for about 75 percent of U.S. vehicle imports. Beyond direct exports, Japanese and South Korean automakers also manufacture many of the vehicles in Mexico and Canada that ultimately land in the American market, leaving them particularly exposed to the tariffs.

In the near term, Mr. Trump’s new tariffs are expected to scramble foreign automakers’ production operations and drag on their earnings. Shares in Japan’s Toyota Motor, Honda Motor and Nissan Motor all fell about 2 percent in Asia trading on Thursday. The stock prices of South Korea’s Hyundai Motor and Kia, as well as Mazda Motor and Subaru — two smaller Japanese manufacturers particularly dependent on U.S. sales — fell between 3 and 6 percent.

However, if the tariffs are prolonged — or even permanent, as Mr. Trump has said they will be — they will likely have far-reaching and damaging effects on the economies of the United States’ North American neighbors and two key allies in Asia.

For Japan and South Korea, automobiles are the top export to the United States. Mexico, in addition to cars, produces tens of billions of dollars worth of automobile parts each year that are exported to its northern neighbor. In Canada, auto manufacturing and auto parts are the country’s second-biggest export by value.

For countries heavily affected by Mr. Trump’s tariffs, economists warned that the new taxes on cars could significantly curb economic growth this year. In the longer term, the tariffs could prompt a carving out of domestic production in countries where the industrial base is heavily reliant on automakers and their supply chains.

In recent years, Japanese and South Korean automakers, as well as European brands — which account for 18 percent of U.S. car imports — have become increasingly reliant on the American market. That is in part because of stagnant demand in their home countries, but also because they are facing heightened competition from local competitors in the world’s biggest car market, China.

This dynamic helps to explain why some of the countries fought intensely to try to secure exemptions from the tariffs.

Japanese officials and lobbyists have argued their case in Washington, highlighting substantial Japanese investment in the United States and warning that tariffs would raise prices for American consumers. In a meeting with Mr. Trump last month, Japanese Prime Minister Shigeru Ishiba said Japan would aim to increase investment in the United States to about $1 trillion by buying more products like American liquefied natural gas.

In Mexico, officials deployed about 10,000 National Guard troops to the U.S.-Mexico border in response to Mr. Trump’s persistent condemnation of illegal migration to the United States. They also handed over to the United States dozens of top cartel operatives and worked to crack down on fentanyl production.

Hyundai in South Korea said earlier this week it would invest $21 billion in expanding U.S. manufacturing. After Mr. Trump praised the announcement as a sign that his policies were working to create more American jobs, many in the industry were looking to see if Hyundai’s pledge would sway the president’s tariff calculus.

Peter Navarro, the senior counselor to the president on trade and manufacturing, singled out Japan and South Korea, in addition to Germany, when speaking to reporters on Wednesday. Those countries, he said, had undermined the ability of U.S. companies to sell their cars overseas.

Japanese brands shipped 1.37 million vehicles to the United States last year, while South Korean automakers exported 1.43 million. In addition, 821,000 light vehicles sold in the United States last year were assembled in the European Union, according to JATO, a research firm. Conversely, U.S. automakers have a minimal presence in Japan, South Korea and Germany — a reality that has vexed Mr. Trump since his first term as president.

Still, foreign officials, who felt they were willing to negotiate with the Trump administration, were stunned by the Wednesday announcement.

“Japan has made significant investments in America and created a significant number of jobs. We do not do this for all countries,” Japan’s prime minister, Shigeru Ishiba, said during a meeting at Parliament. Mr. Ishiba said he was “strongly requesting” that the 25 percent tariff on automobile imports not be applied to Japan.

While Canadian officials have been in close touch with their American counterparts since Mr. Trump’s election in November, Canada was given no advance warning or details of the president’s announcement. “This is a direct attack,” Mark Carney, the Canadian prime minister, said at a campaign stop.

In Mexico, Francisco González, the executive director of the country’s National Auto Parts Industry Association, said that he was “shocked” by the tariff announcement. Earlier this week, the incoming U.S. ambassador to Mexico, Ronald Johnson, had told Mr. Trump he was “encouraged” by the increase in support he had seen from the Mexican government.

The organization that represents German automakers said the tariffs would be “a dire signal for free and rule-based trade” that will have “negative consequences especially for consumers, including in North America.”

For now, companies and officials are left to consider their options and come up with new plans.

In Canada, Mr. Carney had promised help for workers and auto-related industries if Mr. Trump did, in fact, go ahead with tariffs, including a 2 billion Canadian dollar ($1.4 billion) fund to reshape the sector for a future without the United States.

A number of car companies in Asia have been trying to accelerate shipments to the United States before the tariffs Mr. Trump was threatening would take effect. Those automakers are also beginning preparations to ramp up production to the extent they can at the manufacturing plants they operate inside the United States.

However, Michael Robinet, a vice president at the automotive intelligence provider S&P Global Mobility, said that few automakers outside of America’s big three brands — General Motors, Ford Motor and Stellantis — have excess production capacity in the United States. That means that if they want to make more vehicles, they would have to build new factories, which would take years to complete.

For now, Mr. Robinet said, the tariffs would mean chaos for automakers and higher prices for consumers in the United States.

“There’s a belief from some in the government that automakers will simply absorb the added costs,” Mr. Robinet said. However, automakers’ margins are ill-equipped to handle that burden, he said. “Vehicle prices will go up without doubt,” he said, “it’s just a matter of how and when and how much.”

Jack Ewing contributed reporting from New York.

Automobiles Canada Customs (Tariff) Donald J Factories and Manufacturing Germany Honda Motor Co Ltd Hyundai Motor Co International Trade and World Market Japan Mazda Motor Corp Mexico Nissan Motor Co South Korea Stellantis NV Subaru Toyota Motor Corp Trump
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