US President Donald Trump has announced a significant new trade policy, imposing 25% import taxes on cars and car parts entering the United States, which threatens to dramatically reshape the global automotive industry and international trade relations.

The tariffs are set to take effect on 2 April, with taxes on vehicle imports beginning the next day and parts tariffs to commence in May. Trump claims the measure will drive “tremendous growth” for the US automotive sector, promising increased jobs and domestic investment.

However, analysts warn the tariffs could lead to temporary shutdowns of car production, higher consumer prices, and strained international relations. The US imported approximately eight million cars last year, representing $240 billion in trade and roughly half of overall vehicle sales.

Mexico stands as the top car supplier to the US, followed by South Korea, Japan, Canada, and Germany. The tariffs will significantly impact these countries’ automotive exports, with share prices of major car manufacturers already showing market reaction. Toyota, Nissan, and Honda saw share prices decline, while US automakers like General Motors and Stellantis also experienced stock market fluctuations.

The White House has temporarily exempted car parts from Canada and Mexico while establishing a customs assessment system. However, Canadian Prime Minister Mark Carney has already characterized the move as a “direct attack” on his country’s automotive industry.

International responses have been swift. Japan’s prime minister stated it would keep “all options on the table” in response, while the European Commission is evaluating potential countermeasures. UK Chancellor Rachel Reeves described the tariffs as “bad for the UK, and bad for the US.”

Trump emphasized the tariffs would be “permanent,” stating simply: “If you build your car in the United States there is no tariff.”