Asian auto stocks tumbled on Thursday after U.S. President Donald Trump announced a 25% tariff on imported vehicles, escalating trade tensions and drawing sharp criticism from U.S. allies, who threatened retaliation.
The new tariffs on cars and light trucks will take effect on April 3, a day after Trump is set to introduce reciprocal trade measures targeting nations contributing most to the U.S. trade deficit. These duties add to existing tariffs on steel, aluminum, and goods from Mexico, Canada, and China.
In 2024, the U.S. imported $474 billion in automotive products, including $220 billion in passenger cars. Major suppliers included Mexico, Japan, South Korea, Canada, and Germany—key U.S. allies now facing significant economic repercussions.
European Commission President Ursula von der Leyen criticized the move as “harmful for businesses and consumers,” while Canadian Prime Minister Mark Carney condemned it as a “direct attack” on Canadian workers, warning that retaliatory actions were under consideration.
“We will stand up for our workers, our businesses, and our country,” Carney declared in Ottawa.
The announcement triggered sharp declines in shares of automakers, particularly in Japan and South Korea, where auto exports to the U.S. are crucial. Toyota and Mazda stocks led losses in Japan, while shares of Hyundai and Kia also plummeted in South Korea.
Japanese Prime Minister Shigeru Ishiba responded by stating that Tokyo would consider “all available options” to counter the tariffs. Meanwhile, Brazilian President Luiz Inácio Lula da Silva warned that Trump’s decision could harm the U.S. economy.
“These tariffs will drive up prices and potentially fuel inflation, something he hasn’t accounted for yet,” Lula said at a press conference in Tokyo, adding that Brazil would file a complaint with the World Trade Organization over U.S. trade measures on Brazilian steel.
Trump has positioned tariffs as a means to generate revenue, offset tax cuts, and revive American manufacturing.
However, many trade experts predict that the new duties will initially drive up prices and dampen demand, further destabilizing an auto industry already grappling with economic uncertainty caused by Trump’s shifting trade policies.
“We’re making other countries pay for doing business in the U.S. after taking our jobs, wealth, and resources for years,” Trump stated from the Oval Office on Wednesday. “Friends have sometimes been worse than foes.”
