US President Donald Trump has announced new import taxes of 25% on cars and car parts coming into the US in a move that threatens to widen the global trade war.
Trump said the latest tariffs would come into effect on 2 April, with charges on businesses importing vehicles starting the next day.
He claimed the measure would lead to “tremendous growth” for the car industry, promising it would spur jobs and investment in the US.
But analysts have said the move is likely lead to the temporary shutdown of significant car production in the US, increase prices, and strain relations with allies.
The US imported roughly eight million cars last year, accounting for about $240bn in trade and roughly half of overall sales.
Mexico is the top foreign supplier of cars to the US, followed by South Korea, Japan, Canada and Germany.
Many US car companies have operations in Mexico and Canada as well, set up under the terms of the longstanding free trade agreement between the three countries.
Trump’s latest decision threatens to upend the global car industry.
The White House said the order would apply not only to finished cars but also to car parts, which are often shipped in from other countries before getting assembled in the US.
Shares in General Motors slid roughly 3% on Wednesday, as the White House said it was planning the announcement. The sell-off spread to other companies, including Ford, after the president’s remarks as he signed the executive order.
Asked at a press conference if there was any chance he would reverse course, Trump said no.
“This is permanent,” he said, adding: “But if you build your car in the United States there is no tariff.”
South Korean carmaking giant Hyundai announced ahead of the tariffs announcement it would invest $21bn (£16.3bn) in the US and build a new steel plant in the southern state of Louisiana.
Trump hailed the investment as a “clear demonstration that tariffs very strongly work”.
The fresh car import taxes on cars are set to come into force on the same day as so-called reciprocal tariffs kick in for individual countries based on their trading relationship with the US.
Following the announcement of car tariffs, European Commission president Ursula von der Leyen said the bloc would consider the measures before any potential response.
“As I have said before, tariffs are taxes – bad for businesses, worse for consumers equally in the US and the European Union,” she said.
“The EU will continue to seek negotiated solutions, while safeguarding its economic interests.”
The introduction of tariffs on a host of goods being imported into the US is part of Trump’s efforts to protect American businesses and boost manufacturing.
A tariff is a tax on imports collected by a government and it is paid by the company importing the good.
But while protecting domestic businesses, prices for consumers can go up if a company importing goods from abroad passes higher costs on, rather than absorbing them or reducing imports.
Concerns are growing in many countries, including the UK, over potential tariffs impacting exports into the world’s largest economy.
The UK’s trading relationship with US had suggested it would be less exposed than others, but a surprise inclusion of VAT to calculate potential tariffs has prompted questions over the impact on British businesses.
According to the industry body, the Society of Motor Manufacturers and Traders (SMMT), the US is the second largest car export market for the UK after the EU, with mainly luxury cars, such as Jaguars, shipped across the Atlantic.
Mike Hawes, the chief executive of the SMMT, urged the UK and US governments to “come together immediately and strike a deal that works for all”.
“The UK and US auto industries have a long-standing and productive relationship, with US consumers enjoying vehicles built in Britain by some iconic brands, while thousands of UK motorists buy cars made in America,” he added.
In recent weeks, US carmakers, including General Motors and Ford, have called on the US president to exempt imports of cars and vehicle parts from tariffs.