Auto Stocks Drop as Trump Plans 25% Tariff on Car Imports

Summary

WSJ What’s News: Detailed Summary

Episode: Auto Stocks Drop as Trump Plans 25% Tariff on Car Imports
Release Date: March 27, 2025

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1. President Trump's 25% Tariffs on Automotive Imports: U.S. and Global Reactions

On March 26, President Trump announced a decisive move to impose a 25% tariff on all automotive imports starting April 3, a decision aimed at penalizing foreign car manufacturers. This announcement nullified any prospects for exemptions previously considered for countries like Mexico and Canada, which already have free trade agreements with the U.S. The heightened tariffs are set to apply in addition to the existing 25% tariffs on goods from these nations.

Canadian Prime Minister Mark Carney swiftly responded, emphasizing the impact on Canadian unionized auto workers and the extensive bilateral trade with the U.S. At [01:56], Luke Vargas highlighted the severity of the decision:

"The Ambassador Bridge, a symbol of tight U.S.-Canada ties, is now witnessing ties being broken."

2. Implications for the Automotive Industry and Stock Markets

The automotive sector has reacted negatively to the tariff announcement. European automakers saw their stocks drop by 4-5% in Europe, with Asian markets also experiencing declines. Hyundai, notably, faced the steepest downturn due to its significant exports to the U.S., a market where it has recently grown substantially without as much localized production as its Japanese counterparts.

Glenn Stevens Jr., Executive Director of Michauto, expressed concerns at [04:35]:

"The average transaction price of a vehicle is already around $49,000. Any major shifts in pricing could dampen demand and negatively impact the supply chain, leading to production and employment cuts."

Stephen Wilmot, Journal European Autos Reporter, added at [05:23]:

"Analysts estimate that tariffs could add between $5,000 and $10,000 to the price of a car. While some carmakers like BMW plan to maintain current pricing until May, others may absorb part of the tariff, affecting their profit margins."

3. Support from the United Auto Workers (UAW)

Shawn Fain, President of the United Auto Workers Union, voiced strong support for Trump's tariff policy at [06:05]:

"These tariffs are a major step in the right direction for autoworkers and blue-collar communities."
This endorsement is notable given the UAW's traditional alignment with the Democratic Party and underscores a long-standing belief within Michigan's trade unions that previous free trade agreements have disadvantaged U.S. auto workers.

4. European Military Intervention in Ukraine Without U.S. Involvement

Military delegations from approximately 30 nations convened in Paris to discuss the formation of a European armed force that could be deployed to Ukraine to enforce a potential ceasefire with Russia. French President Emmanuel Macron and UK Prime Minister Keir Starmer spearheaded the initiative, advocating for a "pacifist approach" that would avoid placing the U.S. on the front lines. At [08:13], Vargas reported:

"Macron emphasized that the force would act to guarantee lasting peace, responding only if Russia initiated conflict."
Notably, the U.S. was absent from these talks, with Trump's special envoy Steve Witkoff dismissing the need for a European deployment.

5. Political Turmoil in Brazil: Bolsonaro's Trial

Brazil's Supreme Court has mandated that former President Jair Bolsonaro stand trial on five charges, including planning a coup and operating an armed criminal organization. This decision represents a significant blow to one of Trump's closest allies in Latin America. Bolsonaro, responding via a post on X (formerly Twitter), accused the court of attempting to incarcerate him ahead of the upcoming October 20 elections, where polls suggest a narrow victory over President Lula da Silva.

6. Legal Challenges to U.S. Deportation Flights of Venezuelan Gang Members

An appeals court recently upheld a lower court's decision to block deportation flights targeting alleged members of the Trende Aragua Gang, designated as a foreign terrorist organization. This case involves the use of the 1798 Alien Enemies Act, which allows the President to deport citizens from countries deemed enemies of the U.S. The U.S. Court of Appeals for the D.C. Circuit ruled 2-1 that the administration failed to demonstrate the likelihood of prevailing in the case, effectively maintaining the block. The administration has indicated readiness to escalate the matter to the Supreme Court if necessary.

7. U.S. Government Debt Ceiling and Fiscal Deadlock

The Congressional Budget Office (CBO) has projected that the U.S. government will exhaust its ability to pay bills by August or September, a scenario known as the "X date". This creates urgency for lawmakers to address the federal debt limit. The CBO also noted that weaker revenue collection could push the X date to before the mid-June tax payment deadline, pressuring legislators to negotiate a tax and spending bill in conjunction with raising the debt ceiling.

8. Surge in the Used Phone Market

The secondary phone market experienced significant growth in 2024, with over 208 million used phones sold worldwide, marking a 6.4% increase from the previous year, according to IDC. Tech reporter Stu Wu explained at [12:15]:

"Consumers are increasingly opting for secondhand phones, paying only a third to half the price of new models, as device longevity improves and annual updates offer marginal improvements."
Moreover, major manufacturers like Apple and Samsung have entered the refurbished market to retain customers within their ecosystems, offering incentives for purchasing used devices over competitors' products.

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This comprehensive summary encapsulates the key discussions and insights from the WSJ What's News podcast episode, providing readers with an in-depth understanding of the day's significant economic and political developments.

Transcript

[Luke Vargas]

With the Venmo Debit card, you can turn the mini golf outing your co workers paid you back for into a trip to Miami with your best friend, earning you up to 5% cash back. Use Venmo to pay for the things you love to do. Visit Venmo Me Debit to learn more. The Venmo MasterCard is issued by the Bancorp Bank N.A. pursuant to license by MasterCard International, Inc. Terms apply. Dosh Cashback terms apply President Trump makes good on his pledge to penalize foreign carmakers, announcing plans for 25% tariffs on global imports. Plus, European leaders move to build a Ukraine support force without the US and the used phone market takes off.

[Stu Wu]

If you buy a secondhand phone, you pay a third of the price, maybe half the price for a phone that's pretty similar to a brand new one.

[Luke Vargas]

It's Thursday, March 27th. I'm Luke Vargas for the Wall Street Journal, and here is the AM edition of what's news, the top headlines and business stories moving your world Today. Global reaction is pouring in after President Trump yesterday evening announced that the U.S. would impose 25% tariffs on all automotive imports starting April 3. The announcement appeared to dispel any chance of an exemption for countries like Mexico and Canada, which have a free trade agreement with the US and would be added on top of 25% tariffs on goods from those countries that Trump had already imposed. Canadian Prime Minister Mark Carney was quick to respond, invoking the interests of the country's unionized auto workers and its bilateral trade with the US and this is.

[Stu Wu]

A direct attack, to be clear, a direct attack on the very workers that I stood in front of, uniform workers.

[Luke Vargas]

I stood in front of this morning at the Ambassador Bridge, a bridge that is a symbol and a reality up until now of the tight ties between our two countries, ties of kinship, ties of commerce, ties that are in the process of being broken. Carney pledged to respond to the U.S. tariffs, but said he'd first wait to see the details of Trump's executive order. The province of Ontario is home to the bulk of Canada's auto industry, and its premier said yesterday that car plants on both sides of the border would shut shut if Trump's plans went ahead. Meanwhile, we've yet to hear a response from Mexico, the biggest auto exporter to the U.S. the country sends a number of popular vehicles north of the border, including gm, Ram and Toyota pickups, luxury models from BMW and Audi, and affordable sedans from Nissan, though industry officials are warning that the tariffs could trigger price hikes that put vehicles further out of reach for Americans after sizable cost increases since the pandemic. Glenn Stevens Jr. Is the executive director of Michauto, a business group that represents Michigan's auto sector. What we're concerned about is the average transaction price of a vehicle is already at around 49,000, near an all time high. So incremental or even major shifts in that pricing is going to affect demand. And that's a concern of us because that has a backward push on the supply chain with regards to production cuts and maybe employment cuts. So what reaction are we seeing from automakers beyond North America? And how are major players in the industry responding? For more, I'm joined by Journal European Autos reporter Stephen Wilmot. Stephen, first, what has the broad reaction been to this from a sector that has very much been in Trump's crosshairs since even before he took office? Were there any details of what was announced yesterday that have caught folks off guard?

[Stephen Wilmot]

Well, I think this really was about the worst case scenario for global automakers and the US trading partners. So we have seen quite a strong negative share price reaction. The German players are down 4 to 5% in Europe this morning. That followed falls on Asian stock markets. The worst affected was Hyundai, which isn't surprising because it's actually one of the companies that ships most to the us. It always used to be Japan that was number two. But South Korea has taken it over. And one of the reasons for that is, well, Hyundai and Kia have been extremely successful in the US and because their success is relatively recent, they haven't localized as much of their production as the Japanese players who are more mature in the market.

[Luke Vargas]

Japanese carmakers also falling today. And unsurprisingly, Japan's prime minister shot back pretty quickly to Trump's announcement, adding that Tokyo will be looking at all options as it decides how to respond. The European Commission president also saying that the bloc would safeguard its economic interests. Where is all of this leading?

[Stephen Wilmot]

Well, absolutely there could be retaliatory tariffs. The US's trading partners haven't yet said what they might be, but they're saying they're preparing things. So we're likely to see some kind of tit for tat response. The share price reactions do show some kind of skepticism on the part of investors that this is for real. For example, UBS was estimating recently that the German automakers profits could be impacted by 10 to 20%. Well, we haven't seen their share prices fall by that amount. Right.

[Luke Vargas]

Though a concern for the automakers in the long term is let's Say if tariffs lead to the whole automotive supply chain to get more expensive, that could weigh on demand, which is obviously a massive long term risk.

[Stephen Wilmot]

Absolutely. I mean, they have the choice to put prices up to keep their margins, but that has an impact on demand. Analysts are sort of saying anything between 5 and $10,000 could be added to the price of a car. Clearly, carmakers could choose to absorb the tariff hit to some extent. BMW is one of the carmakers that's been most transparent about this so far. It said that it will maintain its prices in the US until early May and then it will reconsider. So there are short term responses and long term responses in this.

[Luke Vargas]

The president of the United Auto Workers Union, Shawn Fain, who's very enthusiastic about Trump's move here, saying that the tariffs were a major step in the right direction for autoworkers and blue collar communities. What of that? How widespread is that sentiment? And is there a sense that this US Trade policy could have a positive effect on American manufacturing in the long run?

[Stephen Wilmot]

Yeah, it's fair to say that the UAW has been one of the most consistent voices in favour of President Trump's tariff policy, despite the historic alignment of the UAW with the Democratic Party. And that reflects a very long held belief in trade union circles in Michigan that the North American Free Trade Agreements have been bad for US Auto workers. Pretty much everyone else points more to the added costs that you get with tariffs. But there is a grain of truth in what Trump has said, that the offshoring stopped during his first term and you got more factory investment since. There is some nuance in there because the shift to electric vehicles have also triggered a wave of investment. So Mercedes Benz has, for example, invested a lot in Tuscaloosa BMW and Spartanburg Hyundai, as they've been successful in the US They've been on shoring more and more of their production. They still import a lot and that's the big problem for them. And Trump's tariff policy could accelerate some of those investments. And we could see further announcements in that vein.

[Luke Vargas]

That was Journal European Autos reporter Stephen Wilmot. Stephen, thank you so much for stopping by.

[Stephen Wilmot]

Thank you.

[Luke Vargas]

And coming up, a coalition of the willing gathers in Paris in order to put boots on the ground in Ukraine. We've got that story and much more after the break.

[Stu Wu]

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[Luke Vargas]

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[Stu Wu]

You need to talk to someone like a good neighbor.

[Luke Vargas]

State Farm is there Military delegations from some 30 nations are in Paris today to discuss plans for a European armed force that could be deployed to Ukraine to implement a potential ceasefire with Russia. French President Emmanuel Macron and UK Prime Minister Keir Starmer have been leading efforts to build a so called coalition of the willing to put boots on the ground and ahead of the summit. Macron said the force could respond if Russia launched an attack. We are not on the front lines, we don't go to the fight, but we are there to guarantee a lasting peace. It's a pacifist approach and the only ones who would at the moment trigger a conflict a Belikov's situation would be the Russians if they decided again to launch an aggression. The US is notably absent from the Paris talks, with Trump's special envoy Steve Witkoff dismissing the idea of a European deployment or even the need for it. Earlier this week, the White House said it had reached an agreement between Russia and Ukraine to eliminate the use of force in the Black Sea, which came after Russian President Vladimir Putin agreed to end attacks on energy infrastructure. However, President Trump said Russia appeared to be slow walking negotiations on an unconditional ceasefire with Moscow trying to extract further concessions from the West. Brazil's Supreme Court has ordered former President Jair Bolsonaro to go on trial for an alleged plot to overturn his 2022 election laws in a blow to one of President Trump's closest allies in Latin America. The justices ruled that Bolsonaro should stand trial on five charges, including planning a coup and running an armed criminal organization. In a post on X, the right wing leader said the court was trying to lock him up ahead of elections planned for October20, with some recent polls showing Bolsonaro would narrowly win the election against President Lula da Silva. An appeals court has dealt a setback to the Trump administration's bid to restart deportation flights of alleged Venezuelan gang members using 1798's Alien Enemies Act. The law allows a president to deport citizens of countries considered US Enemies. However, lawyers successfully argued that deportees weren't given a fair chance to contest their membership in the Trende Aragua Gang, a recently designated foreign terrorist organization, leading a US District judge to block deportation flights earlier this month. In its two to one decision. Yesterday, the U.S. court of Appeals for the D.C. circuit upheld that block, with a judge saying the administration hadn't shown it was likely to prevail. The administration has signaled it's prepared to ask the Supreme Court to hear the case if necessary. The US Government will probably run out of money to pay its bills by August or September. That's the first official estimate provided by the Congressional Budget Office of the so called X date that will require lawmakers to raise the federal debt limit, though the CBO added that significantly weaker revenue collection could push up the X date to before a mid June tax payment deadline. The projection puts lawmakers on the clock to figure out how and when to raise the debt limit, and the forecast for August or September gives them time to combine it with a major tax and spending bill that's still taking shape. And finally, the used phone market is taking off as shoppers feeling ripped off by thousand dollar devices hunt for cheaper alternatives. More than 208 million used phones were sold worldwide in 2024, according to market research company IDC, up 6.4% from a year earlier. And while most buyers do still want a new device, tech reporter Stu Wu explains why more are looking to secondary markets.

[Stu Wu]

Apple and Samsung release these new phones every year and people are thinking, oh, you know, these new updates are pretty marginal. I can't really tell the difference between this phone and one that's one or two years old. If you buy a secondhand phone, you pay a third of the price, maybe half the price for a phone that's pretty similar to a brand new one. And then I think the other thing is phones are just flat out lasting longer. So you could actually hold onto your phones for three, four, five years and they'll survive.

[Luke Vargas]

And Stu told us that used or refurbished devices are so popular, Apple and Samsung are getting into the market themselves.

[Stu Wu]

Well, it just gives them more options to sell things. Apple would rather have them buy a used Apple phone rather than a used phone from Samsung or everybody else. So it's just keeping them in the ecosystem. If you're a phone carrier, you want to offer a re refurbished phone maybe to lure someone from a different carrier at a cheaper price. So that just gives you more options to try to win over a customer or retain a customer.

[Luke Vargas]

And that's it for what's news for this Thursday morning. Today's episode was produced by Daniel Bach with supervising producer Sandra Kilhoff and I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.