Trump Puts 25% Tariff on Imported Cars 03/27 06:12

   President Donald Trump said Wednesday he was placing 25% tariffs on auto 
imports, a move the White House claims would foster domestic manufacturing but 
could also put a financial squeeze on automakers that depend on global supply 
chains.

   WASHINGTON (AP) -- President Donald Trump said Wednesday he was placing 25% 
tariffs on auto imports, a move the White House claims would foster domestic 
manufacturing but could also put a financial squeeze on automakers that depend 
on global supply chains.

   "This will continue to spur growth," Trump told reporters. "We'll 
effectively be charging a 25% tariff."

   The tariffs, which the White House expects to raise $100 billion in revenue 
annually, could be complicated as even U.S. automakers source their components 
from around the world. The tax hike starting in April means automakers could 
face higher costs and lower sales, though Trump argues that the tariffs will 
lead to more factories opening in the United States and the end of what he 
judges to be a "ridiculous" supply chain in which auto parts and finished 
vehicles are manufactured across the United States, Canada and Mexico.

   To underscore his seriousness about the tariffs directive he signed, Trump 
said, "This is permanent."

   Shares in General Motors fell roughly 3% in Wednesday trading. Ford's stock 
was up slightly. Shares in Stellantis, the owner of Jeep and Chrysler, dropped 
nearly 3.6%.

   Trump has long said that tariffs against auto imports would be a defining 
policy of his presidency, betting that the costs created by the taxes would 
cause more production to relocate to the United States while helping narrow the 
budget deficit. But U.S. and foreign automakers have plants around the world to 
accommodate global sales while maintaining competitive prices -- and it could 
take years for companies to design, build and open the new factories that Trump 
is promising.

   "We're looking at much higher vehicle prices," said economist Mary Lovely, 
senior fellow at the Peterson Institute for International Economics. "We're 
going to see reduced choice. ... These kinds of taxes fall more heavily on the 
middle and working class.''

   She said more households will be priced out of the new car market -- where 
prices already average about $49,000 -- and will have to hang on to aging 
vehicles.

   The tariffs on autos would start being collected on April 3, Trump said. If 
the taxes are fully passed onto consumers, the average auto price on an 
imported vehicle could jump by $12,500, a sum that could feed into overall 
inflation. Trump was voted back into the White House last year because voters 
believed he could bring down prices.

   Foreign leaders were quick to criticize the tariffs, a sign that Trump could 
be intensifying a broader trade war that could damage growth worldwide.

   "This is a very direct attack," Canadian Prime Minister Mark Carney said. 
"We will defend our workers. We will defend our companies. We will defend our 
country."

   In Brussels, European Commission President Ursula von der Leyen expressed 
regret at the U.S. decision to target auto exports from Europe and vowed that 
the bloc would protect consumers and businesses.

   "Tariffs are taxes -- bad for businesses, worse for consumers equally in the 
U.S. and the European Union," she said in a statement, adding that the EU's 
executive branch would assess the impact of the move, as well as other U.S. 
tariffs planned for coming days.

   As Trump announced the new tariffs, he indicated that he would like to 
provide a new incentive to help car buyers by allowing them to deduct from 
their federal income taxes the interest paid on auto loans, so long as their 
vehicles were made in America. That deduction would eat into some of the 
revenues that could be generated by the tariffs.

   The new tariffs would apply to both finished autos and parts used in the 
vehicles, according to a White House official who spoke on condition of 
anonymity to discuss the taxes on a call with reporters. The tariffs would be 
on top of any existing taxes and were legally based on a 2019 Commerce 
Department investigation that occurred during Trump's first term on national 
security grounds.

   For autos and parts under the USMCA trade pact applying to the United 
States, Mexico and Canada, the 25% tariffs would only apply to non-U.S. content.

   The administration is reasoning that there is excess capacity at U.S. 
automakers that will enable them to ramp up production to avoid the tariffs by 
manufacturing more domestically, with the official noting that automakers have 
known since the Trump campaign that tariffs were coming.

   The auto tariffs are part of a broader reshaping of global relations by 
Trump, who plans to impose what he calls "reciprocal" taxes on April 2 that 
would match the tariffs, sales taxes charged by other nations.

   Trump has already placed a 20% import tax on all imports from China for its 
role in the production of fentanyl. He similarly placed 25% tariffs on Mexico 
and Canada, with a lower 10% tax on Canadian energy products. Parts of the 
Mexico and Canada tariffs have been suspended, including the taxes on autos, 
after automakers objected and Trump responded by giving them a 30-day reprieve 
that is set to expire in April.

   The president has also imposed 25% tariffs on all steel and aluminum 
imports, removing the exemptions from his earlier 2018 taxes on the metals. He 
also plans tariffs on computer chips, pharmaceutical drugs, lumber and copper.

   His taxes risk igniting a broader global trade war with escalating 
retaliations that could crush global trade, potentially hurting economic growth 
while raising prices for families and businesses as some of the costs of the 
taxes get passed along by importers. When the European Union retaliated with 
plans for a 50% tariff on U.S. spirits, Trump responded by planning a 200% tax 
on alcoholic beverages from the EU.

   Trump also intends to place a 25% tariff on countries that import oil from 
Venezuela, even though the United States also imports oil from that nation.

   Trump's aides maintain that the tariffs on Canada and Mexico are about 
stopping illegal immigration and drug smuggling. But the administration also 
wants to use the tariff revenues to lower the budget deficit and assert 
America's preeminence as the world's largest economy.

   The president on Monday cited plans by South Korean automaker Hyundai to 
build a $5.8 billion steel plant in Louisiana as evidence that tariffs would 
bring back manufacturing jobs.

   Slightly more than 1 million people are employed domestically in the 
manufacturing of motor vehicles and parts, about 320,000 fewer than in 2000, 
according to the Bureau of Labor Statistics. An additional 2.1 million people 
work at auto and parts dealerships.

   The United States last year imported nearly 8 million cars and light trucks 
worth $244 billion. Mexico, Japan and South Korea were the top sources of 
foreign vehicles. Imports of auto parts came to more than $197 billion, led by 
Mexico, Canada and China, according to the Commerce Department.