Trump drives trade war fears as auto tariffs pound allies

Governments from Ottawa to Paris threatened retaliation on Thursday after US President Donald Trump unveiled a 25% tariff on imported vehicles, expanding a global trade war, hammering stocks and testing already strained ties with allies.The new levies on cars and light trucks will take effect on April 3, the day after Trump plans to announce reciprocal tariffs aimed at the countries he blames for the bulk of the US trade deficit.The new levies could add thousands of dollars to the cost of an average vehicle in the US, contradicting Trump’s campaign promise to lower consumer prices. Ferrari announced price hikes of up to 10% for cars sold in the US, and other automakers also warned they might raise prices as well. Dealers raised fears of job losses.The tariffs are a sucker punch for some of the United States’ most important allies and would come atop other trade penalties Trump has already put in place. Mexico, Japan, South Korea, Canada and Germany are the biggest suppliers of automotive imports to the US that were worth $474bn in 2024.Canada Prime Minister Mark Carney called a cabinet meeting to weigh a response, with retaliatory countermeasures a possibility."We will get through this crisis — and we will build a stronger, more resilient economy,” he said on social media.European Commission President Ursula von der Leyen described the move as "bad for businesses, worse for consumers.”Relations with Washington have plummeted over issues such as the war in Ukraine and the upending of a decades-old transatlantic alliance. With billions of euros wiped from German auto shares on Thursday, officials in Europe’s biggest economy called for a tough response."The US has chosen a path at whose end lie only losers, since tariffs and isolation hurt prosperity for everyone,” German Chancellor Olaf Scholz said.In neighbouring France, which was hosting a Ukraine summit without the US on Thursday, Finance Minister Eric Lombard called Trump’s plan "very bad news,” and said the only solution was for the EU to raise its own tariffs. Britain, which has struggled to grow its economy, was scrambling to secure an exemption but also threatened to review subsidies given to Tesla, which is headed by top Trump adviser Elon Musk.Canada froze rebate payments for the electric car maker on Tuesday. The company, which faces declining sales, increased competition and a political backlash, is less exposed to Trump’s tariffs than its rivals, but Musk said on X that the impact is "still significant.”Tesla share rose 5.8%, as did US EV makers Rivian Automotive and Lucid Group, whose supply chains are likewise largely US based. General Motors fell 7.2% and Ford lost 2.6%. Shares of European, Japanese and South Korean automakers fell, as well."None of this leads to more jobs or better wages. It leads to sluggish sales, costlier credit, and potential layoffs — exactly what a fragile economy doesn’t need,” said Nigel Green, CEO of global financial advisory deVere Group.Sources said the Trump administration also has paused contributions to the World Trade Organisation, further hobbling the global trade watchdog as it yanks support for international institutions it sees at odds with its "America First” agenda. Even as politicians threatened retaliation, Europe’s auto industry called for a transatlantic deal to avert a tariff spiral that could hammer an industry that accounts for 6% of the region’s employment."There will an obvious blowback on a sector that has already faced considerable headwinds from a painful transition to EVs alongside tighter regulations, in addition to slower replacement cycles from drivers and higher energy costs,” said Lindsay James, an investment strategist at Quilter.China’s foreign ministry said the US approach violates World Trade Organisation rules, undermines the multilateral trade system and was "not conducive to solving its own problems.” With shares falling, Japanese Prime Minister Shigeru Ishiba said Tokyo will put "all options on the table” and South Korea said it would put in place an emergency response by April.Pages 3, 4