Mexico deployed thousands of National Guards to the border to prevent immigrants from reaching the United States. South Korea said it would invest $21 billion to expand U.S. manufacturing. Japanese officials landed in Washington, willing to invest $1 trillion in the U.S. and buy more U.S. natural gas.
These countries are not enough to prevent one of the biggest tariff issues from becoming a reality on Wednesday, when President Trump announced that cars and auto parts imported into the United States would face 25% tariffs starting April 3.
Mexico, Japan and South Korea, as well as Canada, account for about 75% of U.S. automobile imports. In addition to direct exports, Japanese and Korean automakers also produced many vehicles that Mexico and Canada eventually landed in the U.S. market, leaving them particularly subject to tariffs.
In the near term, Mr. Trump's new tariffs are expected to compete for foreign automakers' production operations and delay their revenue. Shares of Japan Toyota, Honda and Nissan all fell about 2% in Asian trading Thursday. Shares of South Korea's Hyundai Motor and Kia, as well as Mazda Motor and Subaru (two smaller Japanese manufacturers rely specifically on U.S. sales) fell by 3% to 6%.
But if tariffs are extended, even permanently, as Mr. Trump said, they could have far-reaching and harmful effects on the economy of the U.S. North American neighbors and two major allies in Asia.
For Japan and South Korea, cars are the highest exports in the United States. In addition to cars, Mexico is exported to its northern neighbors every year. In Canada, automobile manufacturing and auto parts are the country's second largest export value.
For countries that are heavily influenced by Mr. Trump’s tariffs, economists warn that new taxes on cars could significantly curb economic growth. In the long run, tariffs may promote domestically produced currencies in countries where the industrial base relies heavily on automakers and their supply chains.
In recent years, Japanese and Korean automakers, as well as European brands (18% of U.S. auto imports) have become increasingly dependent on the U.S. market. This is partly due to the stagnation of demand in its home country, and also because they face a surge in competition from local competitors in China, the world's largest auto market.
This dynamic helps explain why some countries are fighting fiercely to try to ensure exemptions from tariffs.
Japanese officials and lobbyists argued in Washington about their case, highlighting Japan's massive investment in the U.S. and warning that tariffs would raise prices for U.S. consumers. Japanese Prime Minister Shigeru Ishiba said at a meeting with Mr. Trump that Japan’s goal is to increase investment in the United States to about $1 trillion by buying more products, such as U.S. liquefied natural gas.
In Mexico, officials deployed about 10,000 National Guards to the U.S.-Mexico border in response to Trump's ongoing condemnation of illegal immigration to the U.S. They also handed over to dozens of American cartel agents and worked to combat fentanyl production.
South Korea's Hyundai Motor said earlier this week that it would invest $21 billion to expand U.S. manufacturing. Many in the industry are seeking to see if Hyundai’s promise will impact the president’s tariff calculations after Trump calls the announcement the policy is working to create more American work.
Peter Navarro, senior adviser to the president’s trade and manufacturing industry, also picked out Japan and South Korea when talking to reporters on Wednesday. He said the countries undermine the ability of U.S. companies to sell their cars overseas.
Japanese brands shipped 1.37 million cars to the United States last year, while South Korean automakers exported 1.43 million. In addition, 821,000 light vehicles sold in the U.S. last year gathered in the EU, research firm Jato said. Instead, American automakers have very little business in Japan, South Korea and Germany – a reality that has troubled people since Mr. Trump's presidency.
Still, Wednesday's announcement shocked foreign officials who felt they were willing to negotiate with the Trump administration.
“Japan has made a lot of investment in the United States and has created a lot of work. We are not doing this for all countries,” said Japanese Prime Minister Shigeru Ishiba at the parliamentary meeting. Mr. Ishiba said he “strongly demanded” that the 25% car import tax rate does not apply to Japan.
Canadian officials have been in close contact with their U.S. counterparts since Trump's November election, but Canada has no early warning or details of the president's announcement. “This is a direct attack,” Canadian Prime Minister Mark Carney said at a campaign stop.
Francisco González, executive director of the country's National Auto Parts Association, said in Mexico that he was “shocked” by the tariff announcement. Earlier this week, the upcoming U.S. ambassador to Mexico, Ronald Johnson, told Mr. Trump that his support for the Mexican government has increased his support.
The organization representing German automakers said tariffs would be a “terrible signal of free and rule-based trade” that would have a negative impact on consumers, including North America.”
Currently, companies and officials need to consider their options and propose new plans.
In Canada, Mr. Carney promises to reshape the industry if Mr. Trump does continue tariffs, including a $2 billion Canadian dollar ($1.4 billion) fund, in order to reshape the industry in a bid to reshape it without the U.S.
Many car companies in Asia have been trying to speed up shipping to the United States until Mr. Trump threatened to take effect. These automakers are also starting to prepare for additional production in U.S. manufacturing plants operating in U.S.
But, automotive manufacturers outside the three major U.S. brands — General Motors, Ford Motor and Stellantis — have over-productivity capabilities in the U.S., said Michael Robinet, vice president of automotive intelligence provider S&P Global Mobility. This means that if they want to build more vehicles, they will have to build new plants, which will take years to complete.
Robinnett said the tariffs mean chaos for automakers and higher prices for U.S. consumers.
“There are some in the government that automakers will only absorb additional costs,” Robinit said. However, automakers' profits are not enough to cope with the burden,” he said. “There is no doubt that vehicle prices will rise, it's just how and when and how much,” he said.
Jack Ewing Reports from New York.
