In a bid to discourage migrants from crossing into the United States, Mexico has sent thousands of National Guard troops to its border. Simultaneously, South Korea announced a $21 billion investment aimed at bolstering U.S. manufacturing. Japanese officials have also arrived in Washington, proposing a $1 trillion investment in the U.S. and a commitment to purchase more American natural gas.
Despite these efforts, a significant tariff concern for these nations was realized on Wednesday, as President Trump announced that a 25 percent tariff on automobiles and car parts imported into the United States would take effect on April 3.
Mexico, Japan, and South Korea, together with Canada, represent approximately 75 percent of U.S. vehicle imports. Additionally, many vehicles manufactured by Japanese and South Korean automakers are produced in Mexico and Canada before entering the U.S. market, making them highly vulnerable to the tariffs.
In the short term, President Trump’s new tariffs are expected to disrupt the production operations of foreign automakers and negatively impact their profits. On Thursday, shares of Japan’s Toyota Motor, Honda Motor, and Nissan Motor fell by around 2 percent in Asian trading, while the stock values of South Korea’s Hyundai Motor and Kia, as well as Mazda Motor and Subaru, saw declines between 3 and 6 percent — significantly affecting smaller Japanese manufacturers reliant on U.S. sales.
Should the tariffs be extended — or implemented permanently, as suggested by President Trump — the repercussions could be profound and detrimental, particularly for the economies of the United States’ northern neighbors and its two crucial Asian allies.
For both Japan and South Korea, automobiles stand as the primary export to the United States. Mexico, alongside its car production, generates tens of billions of dollars in automobile parts exported northward. In Canada, the auto manufacturing sector and auto parts constitute the country’s second-largest export by value.
Economists suggest that for nations impacted by Trump’s tariffs, these new automobile taxes could considerably hinder economic growth this year. Over the longer term, such tariffs might lead to a significant reshaping of domestic production in countries heavily reliant on the automobile industry and its supply networks.
In recent years, Japanese and South Korean car manufacturers, along with European brands — which represent 18 percent of U.S. car imports — have increasingly depended on the American market due to stagnant domestic demand and intensified competition from local car manufacturers in the world’s largest vehicle market, China.
This situation clarifies why several countries vigorously sought exemptions from the tariffs.
Japanese officials and lobbyists have made their case in Washington, emphasizing Japan’s significant investment in the U.S. and warning that these tariffs would inevitably elevate consumer prices in America. During a recent meeting with President Trump, Japanese Prime Minister Shigeru Ishiba indicated Japan’s goal of boosting U.S. investment to about $1 trillion by increasing purchases of American goods, such as liquefied natural gas.
In a response to Trump’s ongoing criticism of illegal immigration, Mexican officials positioned around 10,000 National Guard troops at the U.S.-Mexico border. They also extradited numerous high-ranking cartel operatives to the United States and intensified efforts to combat fentanyl production.
Earlier this week, Hyundai announced an investment of $21 billion to expand its manufacturing presence in the U.S. Following Mr. Trump’s praise for this initiative as evidence of his policies benefiting American employment, industry watchers were keen to determine if Hyundai’s commitment would impact Trump’s tariff decisions.
On Wednesday, Peter Navarro, President Trump’s senior advisor on trade and manufacturing, singled out Japan and South Korea, along with Germany, as countries undermining U.S. companies’ ability to export vehicles.
Last year, Japanese brands exported 1.37 million vehicles to the United States, while South Korean automakers sent 1.43 million. In addition, approximately 821,000 light vehicles sold in the U.S. were assembled in the European Union, according to research firm JATO. In contrast, U.S. automakers maintain a minimal footprint in Japan, South Korea, and Germany — a concern for Trump since his initial presidential term.
Nevertheless, foreign officials who believed their nations were open to negotiations with the Trump administration found themselves surprised by Wednesday’s tariff announcement.
“Japan has made considerable investments in America and has contributed to job creation. We don’t do this for every country,” Japan’s Prime Minister, Shigeru Ishiba, remarked during a parliamentary session. He expressed a “strong request” for Japan to be exempt from the 25 percent tariff on automobile imports.
Although Canadian officials have been in regular communication with their American counterparts since Trump’s election in November, they received no advance notice or details regarding the president’s announcement. “This is a direct assault,” Canadian Prime Minister Mark Carney stated during a campaign event.
In Mexico, Francisco González, the executive director of the National Auto Parts Industry Association, expressed his “shock” at the tariff announcement. Earlier this week, Ronald Johnson, the incoming U.S. ambassador to Mexico, told Trump that he was “encouraged” by the support he observed from the Mexican government.
The organization representing German automakers described the tariffs as “a disastrous signal for free and rule-based trade,” predicting significant negative consequences, particularly for consumers in North America.
For the moment, companies and officials are left with the task of evaluating their alternatives and devising new strategies.
In Canada, Prime Minister Carney has promised assistance for workers and industries related to automobiles, contemplating a 2 billion Canadian dollar ($1.4 billion) fund designed to reshape the sector in anticipation of an altered future without U.S. trade.
Numerous automotive companies in Asia have been hastily ramping up shipments to the United States ahead of the anticipated tariffs. These manufacturers are also beginning to prepare for increased production at the U.S.-based factories they operate.
However, Michael Robinet, a vice president at S&P Global Mobility, indicated that only a few automakers, aside from America’s major three — General Motors, Ford Motor, and Stellantis — have the extra production capacity in the U.S. to meet increasing demands. Consequently, to produce more vehicles, they would need to construct new factories, which would entail years of development.
As it stands, Robinet noted, the tariffs could lead to a chaotic situation for automakers and escalate costs for U.S. consumers.
“Some in the government seem to believe that automakers will absorb these extra expenses,” Robinet said. However, he contended that automakers’ profit margins are ill-prepared to endure such a burden. “Vehicle prices will undoubtedly rise,” he warned, “it’s just a question of how and when, and by how much.”
Jack Ewing contributed reporting from New York.
