US President Donald Trump announced a 25% tariff on auto imports on Wednesday, which is set to take effect next week, claiming it would foster domestic manufacturing. This move escalated the global trade war, it would also increase prices and disrupt production.
According to the Associated Press (AP), the White House expects to raise $100 million in revenue annually. However, this could be complicated as even US automakers import parts from around the world, resulting in higher costs and reduced sales for automakers.
The new tariffs would apply to both finished autos and parts used in the vehicles. However, Trump contends that the tariffs will encourage the opening of more factories in the United States and put an end to a “ridiculous” supply chain, where auto parts and finished vehicles are produced across the United States, Canada, and Mexico. As per the report, to underscore his seriousness about the tariffs directive he signed, Trump said, “This is permanent.”
‘Bad For Business’
Reacting to this, European Commission President Ursula von der Leyen said that it was “bad for business and worse for consumers in the US”. Meanwhile, Canadian Prime Minister Mark Carney called it a “direct attack” on Canadian workers and companies.
Trump, who views tariffs as a strategy to generate revenue to offset his promised tax cuts and to revitalise the long-declining US industrial base, announced that collections would begin on April 3. This follows his plan to introduce reciprocal tariffs targeting countries responsible for the majority of the US trade deficit.
However, as Trump announced the new tariffs, he proposed a new incentive for car buyers, allowing them to deduct the interest paid on auto loans from their federal income taxes, provided the vehicles were made in America. However, this deduction could offset some of the revenue generated by the tariffs.
Under the United States-Mexico-Canada Agreement (USMCA), the 25% tariffs on autos and parts would only apply to content not originating from the United States.
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