By Fang Chenyu
Edit by Qi Fei
After US President Trump announced the imposition of "reciprocal tariffs" ranging from 10% to 49% on global trading partners, multinational automakers faced an impending disaster.
Starting April 3, the measure imposing a 25% tariff on imported vehicles officially took effect. According to White House documents, the 25% tariff will apply to imported passenger cars (sedans, sport utility vehicles, etc.) and light trucks, as well as key automotive components (engines, transmissions, etc.), and may be extended to other parts when necessary. The tariff on automotive parts will not be implemented later than May 3. Trump emphasized that these tariffs are permanent and no exceptions will be granted to any country.
The 25% tariff on imported vehicles imposed by Trump officially took effect on April 3.
In his various tariff measures, the auto tariff is undoubtedly a move against domestic industries. Last year, nearly half of the vehicles sold in the U.S. were assembled overseas, while the U.S.'s main auto trade partners—Mexico, Japan, South Korea, Canada, and Germany—are precisely its important allies. Therefore, the auto tariff will further tear apart the U.S.'s global alliance partnerships.
"For over 40 years and even longer, the entire world has been taking advantage of the U.S. We are simply pursuing fairness, and honestly, I am very generous," Trump responded to external doubts.
The auto tariff has caused panic among Americans, with a "buying spree" quietly emerging. As for Trump's core voter base—the low-income blue-collar workers—may lose the opportunity to buy cars due to skyrocketing prices. In the eyes of outsiders, the global automotive supply chain will face reconstruction, production costs and end prices will continue to rise, which will be a heavy blow to global automakers and consumers alike.
On March 26, Trump signed an executive order at the White House, announcing a 25% tariff on all imported vehicles.
Japan and South Korea Have Limited Negotiating Space
After the "reciprocal tariff" measures were implemented, Japanese and South Korean stock markets opened sharply down—Nikkei 225 fell more than 4%, and the South Korean market fell by 2.7%. As U.S. allies in Asia, Japan and South Korea not only have to bear "reciprocal tariffs" of 24% and 25%, respectively, but also face叠加tariffs from auto tariffs.
Japanese and South Korean autos have always held important positions in the U.S. market—automobiles and parts exports account for more than one-third of Japan's total exports to the U.S., and in South Korea's automobile exports, exports to the U.S. account for more than half of the total. Last year, Korean and Japanese-made vehicles accounted for 8.6% and 8.2% of total U.S. auto sales, respectively, second only to Mexico.
Automotive trade is not only the core pillar of U.S.-Japan-South Korea economic and trade relations but also vital to the economies of Japan and South Korea. For Japan, the automotive industry employs more than 5 million people, accounting for 8% of the national workforce. In South Korea, automobile and parts exports account for 14% of the country's total exports, with nearly half going to the U.S.
Following the announcement of Trump's tax plan, shares of Toyota, Honda, Hyundai, Kia, and other automakers plummeted significantly, wiping out approximately $16.5 billion in total market value. Once new tariffs take effect, Japan's potential GDP growth rate could be cut by 40%. South Korean estimates suggest that this year's auto exports could decrease by 18.6%, resulting in a loss of about $6.14 billion.
A truck loaded with brand-new Toyota cars passes through Otay Mesa Port in San Diego, California.
In Gwangju, the car city of South Korea, a supplier employee at Kia Motors told Reuters, "We are concerned about production volume and employment. Saturday shifts can still be maintained in April, but demand is uncertain." Hiroshi Kodama, who works at a materials company in Tokyo, said, "The automotive industry is a symbol of manufacturing; I worry that this policy will have a significant impact on Japan's economy."
Following the implementation of the new U.S. auto tariffs, the Japanese government promised to make efforts to protect jobs in the domestic automotive industry. On April 3, Japan's Minister of Economy, Trade and Industry, Yorihiko Kojima, stated that the latest tariff measures by the Trump administration were "extremely regrettable."
"We will continue to urge the U.S. to exempt Japan from these tariffs and study the details of the tariff measures, assess their impact on the domestic economy, and do our best to take necessary measures," Kojima said.
Prime Minister Shinzo Abe previously stated that Japan would request an exemption from tariffs from the Trump administration, but he did not rule out retaliatory measures. Abe emphasized that Japan is the largest source of foreign direct investment in the U.S., creating a large number of jobs, and this fact cannot be ignored; Washington should treat this matter with caution.
Looking back to 2016, shortly after Trump's first election victory, then Prime Minister Shinzo Abe quickly launched diplomatic offensives, exchanging private commitments to secure Trump's promise not to impose additional tariffs on Japanese automobiles. Some analysts believe that facing Trump's renewed pressure, Abe's government has limited negotiation space, and the U.S. will not easily let go of Japan's automotive industry this time.
Similar to Japan, South Korea reached a tariff reciprocity agreement regarding auto trade during Trump's previous term, but this is unlikely to serve as a protective "shield." Especially after the agreement came into effect, U.S. auto exports to South Korea actually decreased by about 16%, which could become a new reason for Trump to exert pressure on South Korea.
To address the new tariff threat, Toyota Motor Corporation of Japan was also caught off guard. Toyota ranks second in the U.S. market, with 2.33 million units sold in 2024, just behind General Motors, a U.S.-based brand. According to reports by Reuters, soon after Trump's election, Toyota, which once relied heavily on traditional automobile industries and might benefit from reduced electric vehicle subsidies, viewed it as a favorable signal and donated $1 million to Trump's inauguration ceremony in hopes of receiving special treatment.
In 2017, a Toyota Camry with an "American Made" label was displayed at the Washington Auto Show.
Hyundai Motor Group of South Korea chose to "pay to avoid trouble." Recently, the group announced it would invest an additional $2.1 billion in the U.S., with $5.8 billion allocated to building a steel plant, billions of dollars invested in autonomous driving and artificial intelligence research, and plans to increase annual production in the U.S. to 1.2 million units by 2028. Trump views this as proof that his tariff policy is effective.
March 26, 2024, Hyundai Motor Group Chairman Young-Won Seo delivers a speech at the opening ceremony of a new factory in Georgia.
Europe Prepares for Impact
Europe had already developed a rift with the U.S. over the Ukraine crisis, and the new tariff storm will undoubtedly deepen the cracks in the transatlantic alliance.
Automobile trade is a major source of the U.S.-EU trade deficit—data shows that in 2022, the EU exported $36 billion worth of cars to the U.S., while the U.S. exported only $5.2 billion to Europe, creating a trade deficit of $30.8 billion.
Even before entering politics, Trump expressed anger at this imbalance, often complaining about the abundance of German and Japanese cars on American streets. During his first term, Trump threatened EU automakers with tariffs, but they were not implemented because the EU lowered tariffs on some U.S. goods and increased imports of natural gas and soybeans.
In his second term, Trump intends to seriously consider taxing EU automobiles. On February 26, he criticized the EU during his first cabinet meeting in the new government, saying, "The EU was founded to undermine the U.S." He reiterated, "They are taking advantage of us in another way."
March 31, 2024, White House press secretary Leavitt introduces Trump's tariff policies to the media.
European Commission President Ursula von der Leyen condemned the U.S. move to impose tariffs as "bad for businesses and worse for consumers," adding that the EU would "continue seeking negotiated solutions while safeguarding its own economic interests." The UK government also stated that it was striving to obtain tariff exemptions.
Trump's announcement of auto tariffs sent German automotive stocks plunging by billions of euros. The U.S. is the most important export market for German automakers, with the three major German manufacturers accounting for 73% of EU auto exports to the U.S. Among them, BMW stood out the most, with 370,000 units sold in the U.S. in 2024, a year-on-year increase of 2.5%.
Facing the tariff threat, the German government adopted a relatively tough stance. Chancellor Scholz criticized, "The U.S. has chosen a path that benefits no one, as tariffs and trade isolation harm everyone's prosperity." Economic Minister Robert Habeck called for a decisive response from the EU to the tariff measures, emphasizing, "We must clearly show that we will not back down in front of the U.S."
The French government also listed trade retaliation as an option to respond to Trump's auto tariffs. Finance Minister Bruno Le Maire described Trump's tax plan as "very bad news" and stated that the EU's only countermeasure is to raise its own tariffs.
In the turbulent international environment, European automakers have long established themselves in the North American market, with German automakers such as BMW and Volkswagen (including Audi) building factories in Mexico and Canada in an attempt to bypass U.S. tariff barriers. However, it seems they may have placed their bets incorrectly. If Mexico and Canada fail to receive exemptions, European automakers will suffer greatly.
Facing tariff pressures, European automakers are considering raising prices in the U.S. Ferrari, an Italian luxury car manufacturer, was the first to act, announcing a 10% price increase for certain models sold in the U.S. starting April 1. Other automakers also issued warnings, stating that price increases are unavoidable. Many dealers expressed concerns that tariffs could lead to layoffs.
Some analysts argue that compared to ordinary consumers, buyers of high-end models like Audi, BMW, and Mercedes-Benz are less sensitive to price increases, so price hikes may not affect their purchasing decisions.
Recently, Japanese, South Korean, and European automakers have been scrambling to transport vehicles and a large number of key components to the U.S. According to the Financial Times, Christopherson, CEO of the world's largest automotive transport shipping company Wallenius Wilhelmsen, said that freight demand from Asian countries has exceeded the company's maritime capacity, and they are increasing capacity to meet the demand. Data shows that in February this year, EU auto exports to the U.S. grew by 22%, Japanese auto exports to the U.S. grew by 14%, and South Korean auto exports to North America grew by 15%.
Mexico and Canada Temporarily Granted "Pending Cards"
Due to the existence of the United States-Mexico-Canada Agreement (USMCA), Trump's plans to impose auto tariffs on Mexico and Canada have repeatedly been delayed.
On March 4, the U.S. policy imposing a 25% tariff on Mexican and Canadian goods officially took effect. However, due to its significant impact on the automotive industry, triggering strong opposition from domestic automakers, Trump agreed to provide a one-month grace period for companies that comply with the USMCA standards.
On March 26, Trump signed an executive order at the White House, announcing that a 25% tariff on all imported vehicles would take effect on April 3. The order mentioned that automotive components that comply with USMCA standards will be temporarily exempt from tariffs until adjustments are made after the U.S. Commerce Department and the U.S. Customs and Border Protection work together to establish a taxation mechanism for non-U.S.-origin parts.
In Trump's recently published list of "reciprocal tariffs," both Mexico and Canada were excluded. This not only gives these two countries more negotiating room but also provides global automakers with time to adjust their North American market layouts.
Since the establishment of the North American Free Trade Area in 1994, the U.S., Canada, and Mexico have gradually built an integrated automotive supply chain. During Trump's previous term, the three countries renegotiated and reached the USMCA, stipulating that 75% of automotive components must be produced within the three countries to enjoy tariff reductions. After Biden took office, he further passed the Inflation Reduction Act, limiting the $7,500 electric vehicle tax credit to vehicles manufactured in North America. These policies have made Mexico and Canada havens for global automakers to avoid trade barriers and enter the U.S. market, thus promoting high integration of the three countries' automotive industries.
The USMCA has promoted high integration of the North American automotive industry.
Currently, Mexico has become a major global automotive manufacturing hub, with more than ten multinational automakers operating nearly 40 factories locally. Last year, Mexico exported nearly 3 million vehicles to the U.S., making it the largest source of U.S. auto imports. Similarly, automobiles and parts are Canada's second-largest export product, with 93% flowing to the U.S.
Not only do European automakers build factories in Mexico, but U.S. domestic automakers rely even more deeply on Mexico. General Motors produced 712,000 vehicles in Mexico last year, with 85% sold in the U.S. Ford's proportion was even higher, reaching 92%.
Research shows that if the U.S. simultaneously imposes tariffs on vehicles from Mexico and Canada, the daily loss to the U.S. automotive industry will reach $110 million, with the "Big Three" automakers—General Motors, Ford, and Chrysler—being the hardest hit.
As a short-term response strategy, it is reported that Ford has been stockpiling components that comply with USMCA standards and reassessing cross-border operations. In a memo sent to suppliers recently, Ford Global Chief Supply Chain Officer Liz Dol said that from a cost-benefit perspective, "Ford is strategically stockpiling components that are unlikely to undergo engineering changes in the near future before the tariff exemption deadline arrives."
A Ford F-150 pickup truck is assembled on the production line at Ford's Dearborn, Michigan, factory. Less than half of the components for this model are made in the U.S.
It is worth noting that Mexico supplies 40% of the U.S.'s automotive components, and a single vehicle may circulate between the U.S., Mexico, and Canada seven to eight times before being labeled as "Made in the USA." Imposing tariffs on automotive products from Mexico and Canada will inevitably drive up component costs, impacting the pricing levels and profit margins of U.S. automakers. Mexico's Economy Minister Marcelo Ebrard questioned, "Are we going to impose a 25% tariff on the same vehicle seven times?"
However, given Mexico's severe reliance on auto exports, it still hopes to negotiate more favorable terms than its competitors. Mexican President Andrés Manuel López Obrador admitted, "We don't want to lose any jobs... It's not easy to move factories from Mexico to the U.S., and we still have room for negotiation, cooperation, and consultation."
In contrast, Canada's newly appointed Prime Minister Carrie Kahn adopted a tougher stance, vowing to take countermeasures and seek to reduce economic dependence on the U.S. During a phone call with Trump on March 28, Kahn directly stated that after the U.S. implements further trade actions, the Canadian government will adopt retaliatory tariff measures.
Industry insiders generally believe that the impact of auto tariffs on Canada is relatively small, so it can "stand firmer" in negotiations with the U.S. David Paterson, Ontario's representative in Washington D.C., stated that the depreciation of the Canadian dollar may offset part of the impact of auto tariffs, reducing production costs for Canada's automotive industry.
Brian Kingston, president and CEO of the Canadian Automotive Manufacturers' Association, also noted that Trump allows automakers to deduct U.S.-made components when calculating tariffs. "30%-50% of the components in Canadian-made vehicles come from the U.S., which can offset the 25% tariff to 12.5%."
U.S. Car Market Experiences "Buying Spree"
For U.S. consumers, auto tariffs will result in soaring car prices and repair costs. Calculations show that the cost of just the component tariff alone could increase the cost of domestically assembled vehicles by $3,000 to $12,000 per unit. The resulting adjustment in production costs and market supply-demand changes will further push up new car prices.
Under the shadow of tariff clouds, price-sensitive consumers have already considered purchasing new cars ahead of time. Others have turned to used cars, triggering a wave of car "buying sprees."
December 4, 2024, a large number of imported vehicles are placed on a dock at the Port of Los Angeles.
Recently, traffic on the popular U.S. car trading website Kelley Blue Book surged by 27%, with a 54% increase in new car inquiries. General Motors' data shows that its first-quarter delivery volume soared by 17%, and retail sales increased by 15%; similar increases in Toyota and other automakers' sales in the U.S. are seen as consumer responses to tariff impacts.
The manager of a Subaru dealership in Illinois told The New York Times that following the announcement of the auto tariff, his store experienced its busiest day since opening. He said, "It was absolutely crazy. Customers kept talking about tariffs. Normally, we sell around 15 cars on Saturdays, but that day, we sold 32 cars."
Under cost pressures, automakers are expected to discontinue some low-end models, with entry-level new cars priced below $30,000 potentially exiting the market.
Trump's auto tariff measures will also strongly impact his core supporters—low-income and rural voters. In rural areas of the U.S., where public transportation is underdeveloped, cars are often the only means of transportation for many families. However, the price hike caused by tariffs may force these groups to abandon car purchases. For low-income households, car expenses often approach half the value of their homes, and they cannot withstand more uncertainties in the context of inflation returning.
In response to public skepticism, Trump responded proudly on March 29, saying he didn't care at all about car price increases. In his view, "If foreign cars become more expensive, consumers will buy American cars."
But in reality, the auto sector is the hardest-hit by tariffs. Currently, General Motors' stock has plunged more than 7%, and Ford has fallen by 3.9%, becoming direct victims of the market. In particular, only 45% of General Motors' cars sold in the U.S. are domestically produced, with the remainder all affected by tariffs.
April 9, 2024, a worker installs an engine at a General Motors assembly plant in Indiana.
Tesla, owned by billionaire Elon Musk, is expected to be one of the less affected automakers. This is because Tesla vehicles are primarily manufactured in the U.S., with most components also sourced domestically. However, Tesla's reliance on batteries supplied from China makes it difficult to completely escape the impact.
"Tariffs have a significant impact on Tesla," Musk wrote on social media X. Specifically, this will affect components of Tesla vehicles from other countries, with significant cost impacts.
Due to the "ambiguous" relationship between Musk and Trump, Tesla has become a "target" in the trade war. Following Trump's announcement of auto tariffs, the Canadian government quickly froze all subsidies to Tesla and banned it from participating in the country's future electric vehicle subsidy program. The British government also stated that it is reconsidering Tesla's subsidy eligibility in the UK.
March 11, 2024, Trump test-drives a Tesla Model S at the White House to express support for Musk.
In the U.S., Tesla has become a "lightning rod" for some people to vent their dissatisfaction. Recently, information about Tesla owners and dealerships has been leaked online. An anonymous website lists their names, addresses, and contact details, aiming to incite those dissatisfied with the Trump administration to retaliate. A Tesla service center in Las Vegas even suffered an attack, with a gunman carrying a Molotov cocktail spraying "resistance" graffiti, firing at the Tesla store, and burning several vehicles.
March 18, 2024, a Tesla service center in Las Vegas suffers an attack.
Original article: https://www.toutiao.com/article/7488970966429729280/
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