Volkswacht Bodensee - Trump's auto tariffs spark global outcry as price hikes loom

Major car exporter Germany urged a firm response from the European Union, while Japan said it "will consider all options."

The 25 percent US duties take effect starting 12:01 am Washington time (0401 GMT) on April 3 and impact foreign-made cars, light trucks and vehicle parts.

Experts warn of higher vehicle costs, and Italian carmaker Ferrari said it would raise prices on many models sold to the United States by up to 10 percent from next week.

Global stock markets plummeted with automakers like Toyota, Hyundai and Mercedes leading the plunge. In New York, shares in General Motors tumbled with Ford and Stellantis also declining.

French Finance Minister Eric Lombard said the only solution for the EU is to "raise tariffs on American products in response."

Canadian Prime Minister Mark Carney said he convened a meeting to discuss trade options, while Mexico's Economy Minister Marcelo Ebrard seeks "preferential treatment" for his country.

But Trump ramped up his threats overnight, saying on social media that Canada and the EU could face "far larger" tariffs if they worked together "to do economic harm to the USA."

- Price surge -

JPMorgan analysts estimate the tariffs on autos and parts could cause a $4,000 to $5,300 increase in average auto prices.

It said 82 percent of Ford's US sales are produced domestically, with the corresponding figures for Stellantis at 71 percent and General Motors at 53 percent.

The American Automotive Policy Council representing the three automakers warned that the tariffs must be implemented in a way that "avoids raising prices for consumers" and preserves the industry's competitiveness.

"The steep and broad-based tariffs are likely to cause supply chain disruptions globally," JPMorgan said in a note.

Canadian Vehicle Manufacturers' Association president Brian Kingston said the levies would bring higher costs for producers and consumers, alongside "a less competitive industry."

While Trump invoked emergency economic powers for some earlier tariffs, his auto levies build on a government investigation completed in 2019.

- 'Cheaters' -

About one in two cars sold in the United States are manufactured in the country. Among imports, about half come from Mexico and Canada, with Japan, South Korea and Germany also major suppliers.

Of the US-made cars, their average domestic content is likely around 40 percent, the White House said.

In a briefing Wednesday, Trump's senior counselor Peter Navarro blasted "foreign trade cheaters" who he said turned the US manufacturing sector into a "lower wage assembly operation for foreign parts."

He took aim at Germany and Japan for reserving construction of higher-value parts to their countries.

Since returning to the presidency, Trump has imposed tariffs on imports from major trading partners Canada, Mexico and China -- alongside a 25 percent duty on steel and aluminum.

The latest levies add to those already in place for autos.

But the White House said that vehicles entering under the US-Mexico-Canada Agreement (USMCA) can qualify for a lower rate depending on their American content.

USMCA-compliant auto parts will remain tariff-free as officials establish a process to target their non-US content.

Mexican President Claudia Sheinbaum said tariffs were contrary to the North American trade deal, but her country would wait until early April before responding.

- 'Devastating impact' -

Uncertainty over Trump's trade plans and worries they could trigger a downturn have roiled financial markets, with consumer confidence also slipping.

Trump has defended levies as a way to raise government revenue and revitalize US industry.

Targeting imported cars could strain ties with Washington's allies, however.

"Imposing 25 percent tariffs on imported cars will have a devastating impact on many of our close trading partners," said Wendy Cutler, vice president at the Asia Society Policy Institute and a former US trade negotiator.

Besides automobiles, Trump is eyeing other sector-specific tariffs, including on pharmaceuticals, semiconductors and lumber.

Trump has promised a "Liberation Day" on April 2, when he is set to unveil reciprocal levies, tailored to different trading partners, to address practices that his government deems unfair.

N.Schaad--VB