Asian auto stocks tumbled as President Donald Trump announced a 25% tariff on imported vehicles, intensifying global trade tensions. The new tariffs, set to take effect on April 3, follow previous levies on steel, aluminum, and imports from Mexico, Canada, and China. They are part of Trump’s broader push for reciprocal tariffs targeting countries with large trade surpluses with the U.S.
In 2024, the U.S. imported $474 billion in automotive products, including $220 billion in passenger cars. Major suppliers—Mexico, Japan, South Korea, Canada, and Germany—now face potential economic strain. European Commission President Ursula von der Leyen criticized the move as harmful to both businesses and consumers, while Canadian Prime Minister Mark Carney called it a “direct attack” on Canadian workers, warning of possible retaliation.
Stock markets in Japan and South Korea reacted sharply, with shares of automakers like Toyota, Mazda, Hyundai, and Kia experiencing steep declines. Japanese Prime Minister Shigeru Ishiba said Tokyo would explore "all options" to address the tariffs, while South Korea announced emergency measures to support its auto industry. Brazilian President Luiz Inácio Lula da Silva also voiced concerns, arguing that protectionist policies could hurt the U.S. economy and pledging to challenge the tariffs at the World Trade Organization.
Trump insists the tariffs will generate revenue and revitalize U.S. manufacturing. However, trade experts warn they will lead to higher vehicle prices, reduced demand, and potential job losses. The Center for Automotive Research estimates that new levies will cost car buyers thousands of dollars more while disrupting supply chains that rely on imported parts. Jennifer Safavian, CEO of Autos Drive America, cautioned that the tariffs would reduce consumer choices and harm domestic production.
The United Auto Workers (UAW) union, historically critical of free trade agreements, praised the measure. UAW President Shawn Fain called it "a major step in the right direction" and urged automakers to bring back union jobs to the U.S. Volkswagen, which sources 43% of its U.S. sales from Mexico, is among the foreign carmakers that could be significantly impacted.
Trump warned that any retaliatory measures from the EU and Canada would trigger even steeper tariffs. In a post on Truth Social, he stated that if those nations acted against the U.S., "large-scale tariffs, far larger than currently planned," would follow.
Tesla CEO Elon Musk contradicted Trump’s claim that the tariffs would be "net neutral" for his company, acknowledging their significant impact on Tesla's costs. Meanwhile, analysts fear that Trump's upcoming reciprocal tariff announcement could further destabilize global trade.