Tariff Weekly: Week March 24

Trump's Automotive Tariffs

In a major development, President Trump announced a 25% tariff on all imported vehicles and foreign-made auto parts, effective April 2. The administration described these tariffs as "permanent," with no exemptions planned. The move has sent shockwaves through the global automotive industry, with analysts estimating the policy could introduce up to $110 billion in annual costs for carmakers and potentially raise vehicle prices by as much as $10,000 on some models.

European, Japanese, and South Korean automakers have been particularly affected, with their stock prices tumbling following the announcement. BMW, which manufactures its 3 Series sedan in Mexico, is already subject to a 27.5% tariff after failing to meet USMCA requirements, though the company has pledged to absorb these costs until May 1.

Reciprocal Tariffs Approach

The White House has narrowed its approach to the "reciprocal tariffs" planned for April 2. While early indications suggested the administration would focus on approximately 15 countries with persistent trade imbalances—what Treasury Secretary Scott Bessent called the "dirty 15"—President Trump most recently stated these tariffs would start with "all countries."

This represents a shift from plans that originally included both reciprocal tariffs and sector-specific tariffs on automobiles, pharmaceuticals, and semiconductors. Commerce Secretary Howard Lutnick indicated that April 2 will also mark the launch of the "External Revenue Service," a new entity designed to collect duties from foreign countries.

Secondary Tariffs on Venezuelan Oil Buyers

In an unprecedented move, President Trump announced what he called "secondary tariffs" of 25% on all imports from countries that purchase oil from Venezuela. This novel approach combines elements of tariffs and secondary sanctions, potentially affecting major buyers like China, India, and Spain. The White House cited "numerous reasons" for the action, including allegations that Venezuela has sent "tens of thousands of high level criminals" to the United States.

International Responses

Trading partners have signaled intentions to retaliate against U.S. tariff actions:

• The European Union is considering targeting U.S. services exports, including Big Tech operations, recognizing that "services is where the US is vulnerable."
• Canada's Prime Minister Mark Carney informed Trump that his government will implement retaliatory tariffs following the April 2 announcements.
• Mexico is considering retaliatory measures but is waiting until the U.S. duties take effect.
• Brazil's President Lula da Silva announced plans to challenge U.S. steel tariffs at the WTO, warning that protectionism risks increasing inflation.

Other Trade Actions

Beyond U.S. policy, other significant trade developments occurred this week:

• India imposed anti-dumping duties on four Chinese products, including vacuum flasks and aluminium foil, for a period of five years.
• Vietnam proposed cutting preferential import tariffs on several products, including LNG, cars, and agricultural goods, in an apparent effort to avoid U.S. tariffs.
• China, South Korea, and Japan held their first economic dialogue in five years, agreeing to promote regional trade as they brace for U.S. tariff impacts.
• West African nations Mali, Burkina Faso, and Niger announced a new 0.5% levy on imported goods to fund their three-state alliance.

As April 2 approaches, businesses worldwide continue to adjust their strategies, with many U.S. companies demanding price concessions from Chinese suppliers, shifting production locations, or preparing to pass costs on to consumers. The growing trend of protectionist measures has raised concerns among economists about potential impacts on global growth, inflation, and international cooperation.