US President Donald Trump unveiled new and definitive tariffs of 25% on car imports from all over the world, in a move that in his administration’s mind is set to push domestic manufacturing but that risks escalating a trade war across the globe.
“We’ll effectively be charging a 25% tariff,” Trump told reporters when presenting a directive he signed, adding that “this is permanent.” The new tariff on cars and car parts will enter into force on 3 April. He also signalled his intention to set up incentive plans for customers who buy vehicles made in the USA.
The new directive sparked an immediate response from the USA’s allies, who will be affected. “Tariffs are taxes — bad for businesses, worse for consumers equally in the U.S. and the European Union,” European Commission president Ursula von der Leyen said in a statement. New Canadian Prime Minister Mark Carney said the new tariff “is a direct attack” and vowed that “we will defend our workers. We will defend our companies. We will defend our country.”
The Trump administration foresees that the tariff will bring in $100 billion of fresh revenue per year, hoping it will help to lower the budget deficit. The plan is part of a general overhaul of global trade aimed at bringing back production to the US. Currently, many car makers produce cars for the US market in plants across North America. However, reshaping global supply chains may take time and in the meanwhile experts fear that tariffs will price out working and middle class citizens in the US. The 25% tariff on all cars can raise an import car’s price by $12,500.
Canada and Mexico are also about to see other new tariffs on other goods ramping up. Trump framed those hikes and those on China as a way to pressure those countries to look closely against drug smuggling, production of fentanyl and illegal immigration. Meanwhile, the European Union has to fend off a possible 200% tax on alcoholic beverages in case they decide to go on with a 50% tariff on US spirits.
