U.S. President Donald Trump speaks to the media in the Oval Office at the White House in Washington, D.C., U.S., March 26, 2025.
Evelyn Hockstein | Reuters
U.S. President Donald Trump threatened to impose “far larger” tariffs on the European Union (EU) and Canada if they work together to combat trade tariffs.
“If the European Union works with Canada in order to do economic harm to the USA, large scale Tariffs, far larger than currently planned, will be placed on them both in order to protect the best friend that each of those two countries has ever had!,” Trump said in a Truth Social update on Thursday.
On Wednesday, the White House leader had announced that he will set a 25% tariff on “all cars that are not made in the United States” with the levies due to take effect on April 2.
Trump White House aide Will Scharf said the new duties apply to “foreign-made cars and light trucks” and come in addition to tariffs that are already in place.
Crucially, the tariffs will also apply to car parts including engines, transmission and electrical components — many of which are shipped to the U.S. from abroad and used in American car production, although these are set to come into effect in May. Scharf estimated that the measures will result in “over $100 billion of new annual revenue” to the U.S.
Global markets were roiled as a new front opened in the burgeoning global trade war, with shares of U.S. and Asian automakers falling after the announcement, and European auto giants expected to do the same at the market open on Thursday.
Trump has already upended long-established global trading relationships by imposing import duties on goods coming from Mexico, Canada and China, as well as levies on all steel and aluminum imports, because of what he sees as unfair trade deficits that the U.S. has with a number of its largest trading partners.
The White House on Wednesday said that the latest tariffs would “protect and strengthen” America’s car industry, although analysts point out that U.S. carmakers use parts from all over the world for assembly, meaning that the duties could also impact them.
The EU and Canada have yet to issue any statement suggesting they would unite to harm the U.S., as Trump’s post indicated, but both have signaled that they could retaliate to the latest impositions.
European Commission President Ursula von der Leyen said the EU “will continue to seek negotiated solutions, while safeguarding its economic interests.”
“Tariffs are taxes — bad for businesses, worse for consumers equally in the U.S. and the European Union,” she said in a statement.
Canada’s new Prime Minister Mark Carney meanwhile described Trump’s move as “a direct attack” and told reporters he would be convening a high-level cabinet meeting on Thursday to decide on a response.
“We will defend our workers, we will defend our companies, we will defend our country, and we will defend it together,” he said in Kitchener, Ontario, according to Reuters.
Cars are ‘so political’
The latest tariffs are grim reading for Europe’s already-beleaguered car industry, which has been struggling to innovate and compete with manufacturers in Asia.
The European Automobile Manufacturers’ Association said Thursday that it is “deeply concerned” by the latest tariffs announcement, which it noted comes “at a watershed moment for our industry’s transformation and as fierce international competition mounts.”
Ludovic Subran, chief economist and chief investment officer at Allianz, told CNBC on Thursday that the latest tariffs announcement and the targeting of European automakers — once the jewel in the crown of European industry — was not unexpected.
“Cars are so political,” he told CNBC’s “Squawk Box Europe.”
He added, “You’ve seen the reaction of the stock markets, the car manufacturers. It comes at a time when there is a lot of uncertainty about car consumption, the registration of cars has slumped since the beginning of the year, so it is really another one of these major seismic waves of the Trump administration and starting with what matters the most, cars and reviving the rust belt.”
Trump’s tariff policies have alarmed economists, who warn they are likely to be inflationary and push prices up for U.S. citizens at a time of already low consumer confidence. The same concerns apply to the latest autos duties, analysts say.
“In our view these initial tariffs (if they hold in their current form) would be a hurricane-like headwind to foreign (and many U.S.) automakers and ultimately push the average price of cars up $5k to $10k depending on the make/model/price point,” analysts at Wedbush Securities said in emailed comments Wednesday.
“We continue to believe this is some form of negotiation and these tariffs could change by the week although this initial 25% tariff on autos from outside the U.S. is almost an untenable head scratching number for the U.S. consumer,” the analysts stated.
— CNBC’s Kevin Breuninger and Eamon Javers contributed reporting to this story.
