Natalie Sherman
Business Reporter, BBC News
Getty Images
US President Donald Trump has announced a new 25% trade tax on cars imported into the US.
Trump said the latest tariffs will come into effect on April 2nd and the collection will begin the following day.
He argued that the measure would lead to “risky growth” in the automotive industry, which promised to spur employment and investment in the United States.
However, analysts say the move is likely to cause major disruption in car production, raise prices and tensions with allies.
Mexico is the top foreign supplier of US cars, followed by South Korea, Japan, Canada and Germany.
Many US auto companies also operate in Mexico and Canada, and are established under the terms of a long-standing free trade agreement between the three countries. The impact of tariffs on auto parts sent across borders to manufacturing plants is unknown.
General Motors shares slipped around 3% on Wednesday as the White House said it was planning an announcement. The sale spread to other companies, including Ford, after the president said he made a statement when he signed the executive order.
At a press conference, he asked if he could turn the course back, Trump said no.
“This is permanent,” he said. “However, there are no customs duties when building a car in the US.”
Fresh import taxes on cars are expected to come into effect on the same day that so-called “mutual tariffs” begin in individual countries, based on their business relationship with the United States.
European Commission President Ursula von der Leyen said that Bullock will study the latest announcement, along with other tariffs Trump has pledged to reveal in the coming days.
“As I said before, tariffs are taxes. It’s bad for businesses. It’s equally bad for consumers in the US and the European Union,” she said.
“The EU will continue to seek negotiated solutions while protecting its economic interests.”
The introduction of tariffs on many goods imported into the United States is part of Trump’s efforts to protect American businesses and boost manufacturing.
Customs duties are taxes on imports collected by the government and are paid by the company that imports goods.
However, when protecting domestic businesses, consumer prices can rise when companies importing goods from overseas pass on higher costs rather than absorbing or reducing imports.
In recent weeks, US automakers, including General Motors and Ford, have urged the US president to exempt vehicle and vehicle parts from customs duties.
But Trump has made this move. This revives the actions he first considered during his first term at the White House.
A survey by the Commerce Department at the time warned that the US share of global automobile production had shrunk sharply, falling from 26% in 1985 to just 12% by 2017.
