Trump's Decision Puts Pressure on Global Auto Industry

WASHINGTON, Thursday—The stock markets in the United States and several other countries have once again experienced a correction. The decision by U.S. President Donald Trump regarding import tariffs on automotive goods is the cause.

At the opening of trading on Thursday (27/3/2025), the three main stock indices of the New York Stock Exchange immediately turned red. Dow, S&P 500, and Nasdaq declined. Red indices were also observed in Europe, as reflected in FTSE 100, CAC 40, Euronext 100, Dax, and MSCI, which were seen to drop.

In the US, a decline was observed, among others, in the shares of General Motors, which is an American automotive giant. At the opening of trading, GM's shares immediately plummeted by 7.8 percent.

Shares of Japanese manufacturers declined on the Tokyo Stock Exchange. Toyota Motor Corp. shares fell by two percent, followed by Honda at 2.5 percent, Nissan at 1.7 percent, Mitsubishi dropped by three percent, and Mazda and Subaru each decreased by six and five percent, respectively.

In Europe, Stellantis NV shares fell by 4.1 percent, Porsche AG dropped by 4.3 percent, and Mercedes-Benz Group AG declined by 3.5 percent. The MSCI World Automobiles Index has plunged 22 percent throughout this year.

All these declines stem from the same issue, Trump's decision announced on Wednesday (26/3). "A 25 percent tariff on all cars not manufactured in the U.S.," said Trump.

Starting Thursday (3/4), all passenger cars and light trucks exported to the US will be subject to the additional tariff. Spare parts for both types of vehicles will also be affected.

Trump not only announced BMI for both types of vehicles. He also threatened to impose additional BMI if U.S. trading partners retaliated by applying BMI to U.S. products.

Trump also decided that the tariffs would be applied indiscriminately. Cars made outside the US would be subject to the BMI. That means GM, Ford and other US brands made outside the US would be affected.

Ford and GM have been assembling some of their products in Canada and Mexico. In fact, Mexico is the largest source of vehicle imports to the US. Next are Japan, South Korea, Canada, and Germany.

Like other tariff policies, Trump argued that the policy was to encourage investors to come to the US. If you want to be free of BMI, build factories in the US and employ Americans. "Whoever has a factory here, it will benefit," he said.

There is no detailed explanation of how long the policy will eventually produce the desired expectations by Trump. So far, only one automotive manufacturer, Hyundai Group from South Korea, has confirmed that it will be present in Louisiana, US. The total investment is 21 billion US dollars.

In contrast, the global automotive industry allows the assembly and parts industry to be spread across several countries. The most obvious is in North America, such as Mexico and Canada, where US brands' assembly plants were later united by the USMCA trade agreement since the 1960s.

The US Commerce Department needs time to examine what components are on the list and what is excluded, as reflected in a statement by White House Deputy Press Secretary Harrison Fields.

“Auto parts that comply with USMCA will remain tariff-free until the Secretary of Commerce, in consultation with U.S. Customs and Border Protection (CBP), establishes a process for applying tariffs to non-U.S. content,” Fields said on the X platform.

Brad Setser, a former Treasury official now at the Council on Foreign Relations, said about four million cars in the U.S. coming from Canada and Mexico could potentially be hit with tariffs of 25 percent or more. He believes the policy would raise the price of each vehicle entering the country and reduce sales in the U.S. for a period of time.

The Center for Automotive Research said the policy would add thousands of dollars to the burden on consumers who are going to buy new cars. This will have an impact on sales levels. This condition also has the potential to result in job losses due to the US's dependence on imported parts.

Jennifer Safavian, president and CEO of Autos Drive America, a trade group representing foreign automakers, said cost is now a concern for U.S. car buyers. It's also one of the automakers' focuses on providing affordable, quality vehicles.

"The tariffs imposed today will make it more expensive to produce and sell cars in the U.S., which will ultimately lead to higher prices, less choice for consumers, and fewer manufacturing jobs in the U.S.," he added.

What is clear is that, in preliminary calculations, according to White House Staff Secretary Will Scharf, the administration projects that the tariffs will generate $100 billion in new annual revenue for the US.

Market jitters were compounded by data Tuesday showing consumer sentiment has fallen to its lowest level since 2021. Consumers are worried about rising prices.

European manufacturers Porsche and Mercedes-Benz Group AG, according to a Bloomberg report, are likely to be the hardest hit by the policy. Initial projections are that up to 25 percent of their potential profits in 2026 will be lost.

They have several options to mitigate the decline in profits. The options are to raise prices, look for new markets outside the US, or open a factory in the US.

German automakers are most at risk, as they ship more vehicles to the U.S. than to any other country. German shipments include many high-margin combustion-engine models such as the Porsche 911 sports car and the Mercedes-Benz S-Class sedan, the highest-end saloon outside the Maybach.

Peter Navarro, Trump’s senior adviser on trade and manufacturing, said foreign automakers have turned U.S. manufacturing into a low-wage assembly line operation. He acknowledged targeting Germany and Japan for reserving high-value parts construction at home, rather than in the U.S.

Trump's decision has opened up the potential for a trade war, especially after Trump threatened to increase tariffs if the targeted countries impose tariff policies on US products.

European Commission President Ursula von der Leyen warned that the EU would defend its economic interests while continuing to pursue a diplomatic solution. "We will now assess this announcement, together with other steps planned by the US in the coming days," von der Leyen said.

Japanese Prime Minister Shigeru Ishiba said Tokyo was considering all kinds of countermeasures, while Canada's new Prime Minister Mark Carney called Trump's policy a "direct attack" on his country's workers.

However, Carney said he needed to see the details of Trump's executive order before taking any retaliatory action.

Automobiles are Canada's second-largest export, and Carney noted that the sector employs 125,000 Canadians directly and nearly 500,000 more in related industries.

Ontario Premier Doug Ford was more forceful, saying he would close auto plants on both sides of the border if tariffs were to go ahead. “The president (Trump) called it Liberation Day. I call it Layoff Day for American workers,” Ford said. (AP/AFP/Reuters)