President Donald Trump has announced a significant escalation in U.S. trade policy by implementing a 25% tariff on imported automobiles, effective April 2, 2025.

This move aims to bolster domestic manufacturing and is expected to generate approximately $100 billion in annual tax revenue. Trump emphasised that this tariff is "permanent," indicating a long-term commitment to reshaping U.S. trade dynamics and reducing reliance on foreign auto manufacturers.

The tariffs will apply not only to fully assembled vehicles but also to key components such as engines and transmissions. This is part of Trump's broader strategy to encourage U.S. manufacturers to source more parts domestically, thereby stimulating factory openings within the country.

However, critics warn that this could lead to increased vehicle prices for consumers, with estimates suggesting that the average price of imported vehicles could rise by around $12,500. Such price hikes may disproportionately affect middle and working-class families, potentially limiting their access to new vehicles.

The announcement has already impacted the stock market, General Motors shares dropped about 3%, while Ford saw a slight gain. Stellantis, the parent company of Jeep and Chrysler, fell nearly 3.6%.

In contrast, Ford's stock saw a slight increase amid the uncertainty. Foreign leaders have reacted critically, with Canadian Prime Minister Mark Carney describing the tariffs as a "very direct attack" on Canadian workers and businesses. European Commission President Ursula von der Leyen echoed these concerns, highlighting that tariffs are detrimental to both businesses and consumers in the U.S. and Europe alike.

In addition to the tariffs, Trump proposed a tax deduction for interest paid on auto loans for vehicles manufactured in America, which could offset some of the revenue generated by the tariffs but also complicate the financial landscape for the administration.

As this policy unfolds, it remains to be seen how it will reshape the automotive industry and international trade relations.

ANI