US President Donald Trump said on Wednesday that the United States would be imposing a new 25% tariff on cars and light trucks imported into the US.
Trump said the tariffs would be permanent and go into effect on April 2. The duties are expected to be collected starting April 3, Trump said.
Some 50% of cars sold in the United States are manufactured domestically.
The White House has said the tariffs are meant to boost domestic manufacturing.
"This will continue to spur growth like you haven't seen before," Trump told reporters.
Tariffs could push up car prices
The Trump administration said it expects to raise $100 billion (€93 billion) in revenue annually from the tariffs.
But US automakers source their components from around the world, so they risk facing higher costs and lower sales.
"We're looking at much higher vehicle prices," economist Mary Lovely, senior fellow at the Peterson Institute for International Economics, told the Associated Press. "We're going to see reduced choice. ... These kinds of taxes fall more heavily on the middle and working class.''
The Center for Automotive Research has previously estimated that US tariffs on imported autos could increase the price of a car by thousands of dollars.
The new US tariffs could set off a broader trade war with retaliations that could negatively impact global trade and economic growth while also raising prices for consumers as some of the costs of the taxes get passed along. If the tariffs are passed onto consumers, the average auto price could jump by $12,500.
Additionally, targeting imported cars could raise tensions with countries like Japan, South Korea, Canada, Mexico and Germany, all of which are close US partners.
International reaction to new US tariffs
Canadian Prime Minister Mark Carney reacted to the new auto tariffs, saying they represented a "direct attack" on Canadian workers.
Carney told reporters that he would be convening a high-level meeting of cabinet ministers on Thursday to discuss trade options.
Japanese Prime Minister Shigeru Ishiba said on Thursday that Tokyo will put "all options on the table" in dealing with the new automobile tariffs.
"Japan is a country that is making the largest amount of investment to the United States, so we wonder if it makes sense for [Washington] to apply uniform tariffs to all countries. That is a point we've been making and will continue to do so," he said.
EU 'deeply regrets' tariff decision
European Commission President Ursula von der Leyen swiftly rebuked Trump's tariff announcement.
"I deeply regret the US decision to impose tariffs on European automotive exports," von der Leyen said in a statement.
"As I have said before, tariffs are taxes — bad for businesses, worse for consumers equally in the US and the European Union," she added.
"As a major trading power and a strong community of 27 Member States, we will jointly protect our workers, businesses and consumers across our European Union," Von der Leyen said.
She added that Trump's latest announcement and "other measures the US is envisaging in the next days" would be now assessed.
The head of the German Association of the Automotive Industry (VDA, Hildegard Müller, called the tariffs a "fatal signal for free and rule-based trade."
Müller told the daily Bild that the tariffs would pose a "considerable burden both for companies and the automotive industry's closely interwoven global supply chains — with negative consequences for consumers in particular, including in North America."
