US president Donald Trump has announced a 25% tariff on cars and car parts imported into the country.
Speaking at a White House event, Trump said that “if you build your car in the US, there is no tariff”, and argued that it meant car firms that are yet to manufacture in the US “would come into our country and build”.
“I think our automobile business will flourish like it’s never flourished before,” he added.
“Anywhere from US$600bn to $1trn dollars will be taken in over a relatively short-term period. Right from the beginning, you’re going to have a lot of construction and automobile jobs.”
He also reemphasised his administration’s plans for further tariffs on pharmaceutical and lumber imports.
USMCA talk
The new auto tariffs will come into effect on 2 April, Trump said, with the rate on vehicles entering operation the following day and the tariff on parts entering force later in the month.
While the new tariff measure applies generally to imports rather than on those from specific countries, both Mexico and Canada will be exempt from the tariff on parts while the US establishes a new system to assess the volume of ‘non-US content’ in their exports.
Those parts compliant with the US-Mexico-Canada Agreement (USMCA) will “remain tariff-free” until there is a “process to apply tariffs to their non-US content”, the White House explained in a ‘fact sheet’.
The administration also said that “critical vulnerabilities and choke points in global supply chains”, as well as “unfair trade practices”, were undermining “national security”. It added:
“Legislation, pre-existing trade agreements like the USMCA, revisions to the US-Korea Free Trade Agreement, and subsequent negotiations have not sufficiently mitigated the threat to national security posed by imports of automobiles and certain automobile parts.”
Response
The EU has been particularly vocal in its dissatisfaction with the announcement. A statement from European Commission president Ursula von der Leyen said that she “deeply regrets” the decision, which will affect European car exports.
“The automotive industry is a driver of innovation, competitiveness, and high quality jobs, through deeply integrated supply chains on both sides of the Atlantic.
“As I have said before, tariffs are taxes – bad for businesses, worse for consumers equally in the US and the European Union.”
She added that, while the EU would seek “negotiated solutions”, the EU would also “jointly protect [its] workers, businesses and consumers”.
The Guardian’s reporting notes that share prices in Asia-Pacific-based car companies, including Toyota, Honda and Hyundai, all fell following the announcement.
‘Harder for British companies’
Rachel Reeves, the UK chancellor, said in conversation with the BBC that “we are looking to secure a better trading relationship with the United States. I recognise that the week ahead is important. There are further talks going on today, so let's see where we get to in the next few days.”
A trade war, she said, risked “pushing up inflation after we've worked so hard to get a grip of inflation, and at the same time will make it harder for British companies to export”.
The British Chambers of Commerce’s (BCC) William Bain said that “piling these tariffs on top of the others already expected on 2 April, will sap business confidence and add further uncertainty for both UK and US firms”.
