Trump Announces 25% Tariff on Imported Cars
On Wednesday, U.S. President Trump announced a 25% tariff on imported cars, set to take effect on April 2, aiming to promote the return of automobile manufacturing to the United States. The automobile tariffs are projected to generate up to $100 billion in additional revenue for the U.S. annually. Under the pressure of Trump’s tariffs, all four major U.S. stock indices suffered significant declines, with automobile stocks becoming the center of selling pressure.
(Background: JPMorgan: The risks of Trump’s tariff war are becoming clearer; it’s time to “stop selling high” on U.S. stocks)
(Context: Fed’s Bostic: Only “one rate cut expected this year”; the tariff war hinders the effectiveness of inflation control, as Trump puts further pressure on Powell to cut rates)
Details of the Tariff Announcement
On Wednesday, U.S. President Trump announced a 25% tariff on imported cars and light trucks not manufactured in the United States, effective April 2, with collection starting on April 3. This move expands Trump’s trade war aimed at promoting U.S. manufacturing and paves the way for larger retaliatory tariffs next week.
The White House noted that the automobile tariffs apply not only to complete vehicles but also cover critical components such as engines, transmissions, powertrain parts, and electrical components. Furthermore, the scope of these tariffs may be expanded in the future. Trump described these tariffs as “permanent” measures and emphasized that he does not intend to negotiate exceptions.
The White House stated that under the United States-Mexico-Canada Agreement (USMCA) reached during Trump’s term, importers could prove that a certain percentage of their products contains U.S. content; thus, the 25% tariff would only apply to the non-U.S. sourced portion of the products.
Additionally, these new tariffs will be added on top of existing tariffs, which are estimated to generate up to $100 billion in additional revenue for the U.S. annually.
Meanwhile, Trump is preparing to introduce reciprocal tariffs on April 2, potentially setting rates based on countries. Trump hinted that certain trading partners might receive reductions or exemptions, but he also threatened to impose more tariffs on other industries such as timber, semiconductors, and pharmaceuticals:
“This will be America’s true liberation day, right on April 2, and I am very much looking forward to it.”
Industry Reactions
Jennifer Safavian, president of the trade organization Autos Drive America, which represents foreign automakers, warned that the automobile tariffs will raise the costs of producing and selling cars in the U.S., ultimately leading to higher prices, fewer consumer choices, and a reduction in manufacturing job opportunities in the U.S.
Last year, the total amount of imported cars and light trucks to the U.S. exceeded $240 billion, and analysts have indicated that these new tariffs could lead to price increases of thousands of dollars per new vehicle. A study revealed that imposing tariffs on Canada, Mexico, and China could increase the production cost of a crossover SUV by about $4,000, while an American-made electric vehicle could see a price increase of up to $12,000.
Stock Market Impact
Faced with Trump’s tariff pressure, all four major U.S. stock indices experienced declines:
- The Dow Jones Industrial Average fell by 132.71 points, or 0.31%, closing at 42,454.79 points.
- The Nasdaq Composite dropped 372.84 points, or 2.04%, closing at 17,899.01 points.
- The S&P 500 index decreased by 64.45 points, or 1.12%, closing at 5,712.2 points.
- The Philadelphia Semiconductor Index fell by 152.59 points, or 3.27%, closing at 4,508.74 points.
Automobile stocks became the center of selling pressure, with U.S. auto giant General Motors down 3.12%, multinational auto giant Stellantis down 3.55%, and electric vehicle giant Tesla down 5.58%.
Asian automobile stocks also opened sharply lower today, with Toyota’s stock price dropping by as much as 4%, Honda down 3.1%, Nissan down 3.5%, and Mazda plunging over 5%. South Korea’s Hyundai fell by as much as 3.2%, while Kia dropped 2.7%.
Bitcoin’s Unexpected Resilience
Although Bitcoin was also affected and fell, it surprisingly showed resilience, rebounding above $87,000.
