US President Donald Trump’s 25% tariffs on autos are sending shockwaves through the global supply chain, Kallanish reports.

Confirmed on Wednesday night, the levies will be applied on 2 April to imported passenger vehicles and light trucks, as well as key automobile parts such as engines, transmissions, powertrain parts, and electrical components.

Companies subject to the United States-Mexico-Canada Agreement (USMCA) will be able to certify their US content and systems, so that the levy will apply to non-US content and systems. USMCA-compliant automobile parts will remain tariff-free until the Secretary of Commerce establishes a process to apply tariffs to their non-US content.

According to Tom Narayan, analyst at RBC Capital Markets, “the language appears to exempt a good portion of the supplier complex.” For example, seating and wire harnesses are largely made in Mexico.

Moreover, USMCA negotiations – which are due next year but may be brought forward – could exempt US OEMs from tariffs on Mexican and Canadian imports.

Canada’s Prime Minister Mark Carney said Trump’s auto tariffs are “a direct attack” on Canadian workers and that it “would be appropriate that the President and I speak,” but did not clarify when that would happen. Mexican President Claudia Sheinbaum has not reacted yet to the new tariffs, but said on Wednesday morning that she was planning on discussing with Trump ahead of the 2 April implementation.

“German OEMs are likely worst hit but we do wonder if the threat of retaliatory tariffs from Europe might discourage tariffs on Europe from being implemented given jobs at SUV plants in the US,” Narayan says.

Mercedes, BMW, and General Motors are believed to be the companies most exposed, followed by Ford and Stellantis. According to Narayan, Tesla stands to benefit from the tariffs because of domestic production capacity and reduced competition from imports into the US. Yet, its ceo Elon Musk says: “Tesla is not unscathed here. The tariff impact on Tesla is still significant.”

Overall, permanent tariffs on finished vehicles would likely result in lower production levels, which would be a negative for suppliers, Narayan notes.

On Thursday morning, European shares in Mercedes and Stellantis both lost 3%, with BMW down by 2%. In New York premarket trading, GM and Ford shed 6.5% and 3% respectively, while Tesla remained flat.

EU president Ursula von der Leyen says that she “deeply regrets” the measure. “The EU will continue to seek negotiated solutions, while safeguarding its economic interests,” she adds.

The White House argues that the tariffs will reduce the US trade deficit with other countries, which reached $93.5 billion in 2024 for automobile parts. However, the Peterson Institute for International Economics (PIIE) notes this is only likely if the EU does not retaliate, while tariffs overall will affect GDP growth for countries involved.

“It is unlikely that these tariffs alone could push the US into recession unless there is a significant increase in uncertainty that impacts financial markets, or the policy is combined with mass deportations from the US,” PIIE analysts note. “That said, with recession concerns growing, a policy that slows US economic growth would be unhelpful.”