President Donald Trump on Wednesday announced 25% tariffs on all cars shipped to the United States, a significant escalation in a global trade war.
The tariffs, set to take effect on April 3 at 12:01 am ET, are aimed at expanding America’s auto manufacturing prowess. For decades, because of a free trade agreement, automakers have treated Canada, Mexico and the United States as one big country, with no tariffs among them. Although the United States is home to a significant automaking industry, Trump wants to grow it.
“Frankly, friend has been oftentimes much worse than foe. And what we’re going to be doing is a 25% tariff on all cars that are not made in the United States,” Trump told reporters on Wednesday before signing an executive proclamation in the Oval Office. “If they’re made in the United States, it’s absolutely no tariff.”
New tariffs will be applied not just to foreign-made cars but also to car parts, including engines and transmissions. The tariffs on car parts are set to take effect “no later than May 3,” according to the text of the proclamation Trump signed.
Parts coming from Canada and Mexico that comply with the United States-Mexico-Canada Agreement (USMCA) will be exempt from the tariffs until US Customs and Border Protections has a system in place to apply tariffs to non-US parts, according to a fact sheet published by the White House on Wednesday.
Trump said he’s been in touch with the Big Three automakers, Stellantis, Ford and General Motors. “If they have factories here, they’re thrilled,” he said. “If you don’t have factories here, they’re going to have to get going and build them.”
All three companies’ stocks fell in after-hours trading after Trump’s announcement. Shares in General Motors (GM) plunged more than 7% after-hours, while Ford (F) and Stellantis (STLA), which produces Jeep, Ram, Chrysler and Dodge cars, both fell by more than 4%.