U.S. President Donald Trump has announced his intention to impose a 25% tariff on auto imports, alongside chips and pharmaceuticals, causing a stir in international trade.
What Happened: Trump disclosed on Tuesday his plan to implement auto tariffs “in the neighborhood of 25%”. These tariffs are anticipated to take effect as early as April 2, following a report from his cabinet members outlining options for import duties, according to a Reuters report today.
The President also announced that sectoral tariffs on pharmaceuticals and semiconductor chips would start at “25% or higher” and rise substantially during the course of a year. He did not specify a date for announcing those duties, stating that he wanted to allow drug and chip manufacturers time to establish U.S. factories and avoid tariffs.
Trump also declared that he anticipated some of the world’s largest companies would announce new investments in the U.S. within the next few weeks.
Following this announcement, Asian stocks retreated after a five-day rally due to increasing trade tensions and geopolitical uncertainty. The MSCI Asia Pacific Index dipped slightly, driven by declines in stocks from Hong Kong and Japan, particularly Japanese automakers like Toyota Motor Corp (NYSE:TM) and Honda Motors (NYSE:HMC). However, semiconductor stocks rose in China.
Meanwhile, Tesla Inc‘s (NASDAQ:TSLA) Chinese rivals NIO Inc. (NYSE:NIO), Li Auto Inc. (NASDAQ:LI), and BYD (OTC:BYDDF) ended mixed on Wednesday.
Why It Matters: Trump has consistently expressed his dissatisfaction with what he perceives as the unfair treatment of U.S. automotive exports in international markets. A 25% auto import tariff would heavily impact the global auto industry, which is already facing uncertainty due to Trump’s tariff policies. Notably, Trump, during his first term, threatened to impose a similar 25% car tariff but ultimately refrained from doing so.
Last week, Trump was considering imposing a tariff of up to 100% on Taiwanese semiconductors to make the U.S. self-reliant. On this, Stephen Ezell, vice president for global innovation policy at the Information Technology and Innovation Foundation (ITIF) told CNA, “It would have a very significant and very deleterious impact on the business models of companies like Apple Inc. (NASDAQ:AAPL) and Nvidia Corp.(NASDAQ:NVDA) that rely on TSMC (NYSE:TSM) (for their chip manufacture.”
Previously, Kevin O’Leary, a Shark Tank investor, voiced his frustration over Canada’s trade situation with the U.S. suggesting that Trump’s tariffs could raise taxes by $1 trillion. These developments underscore the potential economic implications of Trump’s tariff policies.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
