Trump sets auto tariffs announcement for Wednesday

He himself has suggested tariffs could run as high "in the neighbourhood of 25%

US President Donald Trump will announce plans for long-promised tariffs on automotive imports at a press conference on Wednesday, widening the global trade war he kicked off upon regaining the White House this year in a move auto industry experts expect will drive up prices and stymie production.

The White House has given no details on the extent of the expected tariffs, including whether there would be any carve-outs for vehicles or parts produced under the umbrella of the US-Canada-Mexico Agreement, the regional trade deal that Trump negotiated during his first term that provides for largely duty-free trade with the two largest US trading partners.

Trump himself has suggested tariffs could run as high "in the neighbourhood of 25 percent."

Trump had said on Monday that tariffs on imported cars could come this week, ahead of plans to unveil next week a swath of reciprocal tariffs aimed at the countries responsible for the bulk of the US trade deficit. Trump, who sees tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining US industrial base, has for weeks promised to announce those levies, and possibly some additional sectoral tariffs, on Apr 2.

Industry experts and former US officials expect the administration to rely on an investigation Trump used during his first term as justification for the new levies.

Shares of US-listed automakers fell on news of the press conference on concerns tariffs would send shock waves through a global auto industry that is already reeling from uncertainty caused by Trump's rapid-fire tariff threats and occasional reversals.

The US stock market was also lower on worries over tariffs, which have dogged investors for much of the last month. The benchmark S&P 500 Index .SPX was down more than 1% ahead of the press conference, and is down 4% so far in March for its worst monthly performance in nearly a year.

Since taking office on Jan 20, Trump has announced and delayed tariffs on Canada and Mexico for what he alleges is their role in allowing the opioid fentanyl into the US; set import taxes on goods from China for the same reason; launched hefty duties on imports of steel and aluminum; and has repeatedly touted his plans to announce global reciprocal tariffs on Apr 2.

Tariffs could also drive costs of cars higher for consumers by thousands of dollars, hitting new vehicle sales and resulting in job losses, since the US automotive industry relies heavily on imported parts, according to the Center for Automotive Research.

The US imported $474 billion worth of automotive products in 2024, including passenger cars worth $220 billion. Mexico, Japan, South Korea, Canada and Germany, all close US allies, were the biggest suppliers.

Cox Automotive, an automotive services provider, on Wednesday forecast that if there are no tariff carve-outs for the auto industry on imports from Mexico and Canada, $3,000 would be added to the cost of a US-made vehicle and $6,000 on a vehicle made in Canada or Mexico.

If tariffs go through, by mid-Apr Cox expects disruption to “virtually all” North American vehicle production leading to 20,000 fewer vehicles produced per day, or about a 30 percent hit to production.

“Over the longer term, we expect sales to fall, new and used prices to increase, and some models to be eliminated if those tariffs persist, and we've yet to hear details about tariffs on the European Union, Japan and South Korea,” Cox Chief Economist Jonathan Smoke said. “Bottom line, lower production, tighter supply, and higher prices are around the corner, reminiscent of 2021.”

Incentives are already starting to decline, Cox noted. The new vehicle market is now looking at a return of inflation, Cox Senior Economist Charlie Chesbrough said on the firm’s forecast call. The average transaction price for a new vehicle is now $48,039, which is down from the peak of about $50,000 from in December of 2022 but up 1 percent from last year.

“Given the impact of tariffs, prices are likely to start rising at a much faster rate,” Chesbrough said.