Carmakers Shares Tumble After Trump Announces 25% Auto Tariff

There was good and bad news on the global trade front from the White House on Wednesday.

The bad news was that the US will now apply 25% tariffs on vehicles made by foreign carmakers who want to sell their autos in the United States. This was a direct blow that knocked billions off transport stocks across Asia and the rest of the world on Thursday.

But the “good news” – if you can call it that, and provided there are no more drastic changes – is that President Trump has said the reciprocal tariffs that will be announced next Tuesday (April 2) will be “very lenient,” he said on Wednesday.

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The latter news suggests the US is on track to achieve some of its goals because of tariff cuts by allies and rivals, and vows to bolster US imports.

The intention of the auto tariff is more than just protecting the US auto sector, it aims drive foreign carmakers to build new factories in the United States.

But the auto sector is reeling over the likelihood of weaker profits and carmakers with plants in Mexico and Canada, both foreign and American, could be hit hard. BYD, one of the biggest carmakers, could now ditch plans to make vehicles in Mexico.

Japanese transport stocks slide

Some $16.5 billion was wiped from transport stocks in Tokyo, according a Reuters assessment of LSEG data. They also slid in South Korea, and Europe was braced to sell, with the euro at three-week lows and German DAX futures down 0.7%.

Toyota fell 3.2%, Honda 2.83% and Nissan 2.6%. Hyundai Motor and Kia in South Korea dropped about 4% each.

Volkswagen, Europe’s top car maker, is in the frame since 43% of its US sales are sourced from Mexico, S&P Global Mobility estimates, and even US marques were down in after-hours trade since their supply chains spread across North America.

The tariffs have been well flagged, so some of the losses were limited because of how much had already been priced in and because car ownership is so popular in the United States that investors think consumers will eventually just keep buying.

But the signal – hurting allies and car buyers – was nevertheless unsettling for markets, which have been slow to accept that the levies may become permanent fixtures and drive lasting changes in world trade flows.

The head of Germany’s car industry association said the tariffs are a “fatal signal” for global trade.

“It’s hard not to interpret this as anything but a cue for higher prices and lower growth,” Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities in Singapore, said.

Trump said 25% tariffs on imported cars and light trucks would begin on April 3. Almost half of the 16 million cars sold in the US last year were imported, with a total value exceeding $330 billion, Goldman Sachs analysts said.

The investment bank’s analysts expect a hit to sales, before a gradual recovery. But the damage would be enough to put Toyota, Honda, Nissan, Mazda Motor, Subaru and Mitsubishi Motors below market consensus profit estimates for the 2026 financial year – with Mazda taking the heaviest hit.

Mazda, US carmakers shares down

The new levies could add thousands of dollars to the cost of an average US vehicle purchase and impede production due to the intertwined manufacturing operations developed over decades by carmakers across Canada, Mexico and the United States, Reuters said.

In US after-hours trade, General Motors tumbled 6%, while shares in Ford fell almost 5%. Shares in Tesla fell by over 5%, but analysts say the group has faced a public backlash in Europe and elsewhere over CEO Elon Musk’s work to cut US government spending and personnel, plus public support for far-right politicians.

BYD, which is leading an overseas push by Chinese automakers, said it has no plans to sell into Canada or the US but will grow global sales and build factories abroad. Its shares rose 2.3% on Thursday for a 53% gain so far this year.

Shares of other Chinese car and parts makers edged up yesterday as they may avoid major impacts, because while they have expanded sales in Southeast Asia, Europe and elsewhere, their sales in the US are limited.

Earlier in March, Volkswagen said it was working on back-up plans for how its passenger car brand could tackle US tariffs on imports from Mexico, while BMW prepared to absorb the cost.

Other than automakers’ shares, market moves were muted. Bond markets were steady. The Mexican peso slipped, though only slightly, outside of its usual trading hours, and the Canadian dollar was steady.

Investors are waiting for further details of a wider range of tariffs Trump says he will levy on trading partners next week.

“I think the big concern is that not only will these tariffs be disruptive and economically harmful, but they indicate that the Trump administration’s shake-up of global trade won’t necessarily end with next week’s announcement,” Kyle Rodda, a market analyst at Capital.com in Melbourne, told Reuters.

“This potentially drags out trade uncertainty even longer and raises the question of how radical a change to the global trade order is Trump trying to bring about.”