President Donald Trump said he would likely impose tariffs on automobile, semiconductor and pharmaceutical imports of around 25 per cent, with an announcement coming as soon as April 2nd in a move that would represent a dramatic widening of the president’s trade war.
Mr Trump has previously announced 25 per cent tariffs on steel and aluminium that are set to take effect in March. Tuesday’s comments are his most detailed yet in specifying other sectors to be hit with fresh barriers if implemented.
“I probably will tell you that on April 2nd, but it’ll be in the neighbourhood of 25 per cent,” Mr Trump told reporters at his Mar-a-Lago club when asked about his plan for car tariffs.
Asked about similar levies on pharmaceutical drugs and semiconductor chips, the president said: “It’ll be 25 per cent and higher, and it’ll go very substantially higher over a course of a year.” Mr Trump said he wanted to give companies “time to come in” before announcing new import taxes.
“When they come into the United States and they have their plant or factory here there is no tariff, so we want to give them a little bit of a chance,” he said.
New levies on automobiles would have sweeping effects on the industry. The roughly 8 million passenger cars and light trucks brought into the US last year accounted for about half of US vehicle sales. European carmakers including Volkswagen and Asian companies including Hyundai would be among the most affected.
Mr Trump didn’t specify whether the measures would target specific countries or apply to all vehicles imported to the US. It’s also unclear whether cars made under a free trade agreement with Canada and Mexico would be spared from industry-specific duties, should they take effect.
Equities slipped across Asia when markets opened on Wednesday. While investors have seen prior threats of levies as a bargaining tool, they remain cautious amid the uncertainty.
While there are scant details about the latest tariff threat, it’s clear that the targets in Mr Trump’s second trade war have broadened beyond China and will hit Asia in particular, according to Alicia Garcia Herrero, chief economist for the Asia Pacific region at Natixis.
“In relative terms, Trump 2.0 is clearly going to hit everybody,” she said. “Whoever thought that the rest of Asia outside of China may be a winner in this trade war was wrong.”
Globally, the countries most exposed to the most recent announcement include Mexico and South Korea, where exports of passenger cars to the US are equal to 2.4 per cent and 1.8 per cent of gross domestic product respectively, according to Bloomberg Economics. When it comes to chips, Malaysia and Singapore are among the most exposed.
Car making powerhouses South Korea and Japan are also in the line of fire, particularly if recent levies are stacked with prior ones. Japan — where vehicle exports make up the largest chunk of outbound shipments and the US is the largest market — has already raised the issue with the White House.
A new 25 per cent tariff would equate to a third of Toyota’s fiscal 2025 profit guidance and nearly half of Honda’s, Bloomberg Intelligence research shows.
Industry experts, lobby groups and executives have warned that steep new tariffs on the industry would have broad ripple effects, including higher prices for consumers and steep new costs for the industry.
Other countries have promised swift retaliation once Mr Trump’s tariffs are applied and said they’d target politically sensitive goods that are made in Republican states.
The European Union’s top trade official is traveling to Washington this week to meet counterparts for a last-ditch effort to avoid getting hit by duties in April. Mr Trump, however, has signalled there’s not much any one country can do to get out from the tariffs if he views the trading relationship as unbalanced.
Mr Trump has also threatened other streams of tariffs, all part of an effort to rebalance the US’s trading relationships across the globe. The president has long accused other countries of ripping off the US and views import duties as a way to bring industries back to America and collect more revenue. Many economists say they would raise consumer prices for Americans and stymie the fight against inflation.
The president has said he would apply “reciprocal” levies on a country-by-country basis as soon as April, though specifics are still being determined. He has also threatened duties on some of the US’s biggest trading partners, such as a 10 per cent rate already applied to China and 25 per cent tariffs on Canada and Mexico that have been deferred until at least March 4th. The measures would stack on top of one another, meaning that Mexican and Canadian producers in certain sectors could pay as many as three tariffs.
Altogether, Mr Trump’s moves, if enacted, stand to remake supply chains and trade flows — and US prices. Tariffs are paid by importers and often passed onto consumers, though sometimes offset by price reductions abroad.
“It seems like no one is really getting through this unscathed,” said Katrina Ell, head of Asia Pacific economies at Moody’s Analytics. “I hope they’re using them as a negotiating tool. What we know from the past is that these tariffs don’t work as Trump wants them to work.” – Bloomberg
