WASHINGTON (Reuters) -U.S. President Donald Trump on Wednesday unveiled a 25% tariff on imported cars and light trucks starting next week, widening the global trade war he kicked off upon regaining the White House this year in a move auto industry experts expect will drive up prices and stymie production.

"What we're going to be doing is a 25% tariff for all cars that are not made in the United States," Trump said at an event in the Oval Office. 

Trump, who sees tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining U.S. industrial base, said the new import taxes will go into effect on April 2, the same date he plans to announce reciprocal tariffs aimed at the countries responsible for the bulk of the U.S. trade deficit. Collection of the new auto tariffs would begin on April 3.

The announcement drew swift condemnation from the European Union and from Canadian Prime Minister Mark Carney, who called it a "direct attack" on Canadian workers. '"We will defend our workers, we will defend our companies, we will defend our country, and we will defend it together," Carney said. Shares of automakers fell in after-hours trading and U.S. equity index futures slid, indicating stocks were headed for a lower open on Thursday.

Details of the proclamation Trump signed were still emerging, but their legal basis was a 2019 national security investigation into auto imports that Trump's first administration conducted, according to a photo of his signed proclamation seen by Reuters.

The proclamation invokes Section 232 of the Trade Act of 1962. The 2019 investigation found that auto imports impair U.S. national security, but at the time Trump did not take action to impose tariffs.

The directive also exempts for now automotive parts that are compliant with the U.S.-Mexico-Canada Agreement on trade that Trump negotiated during his first term. The agreement allows for largely duty-free trade between the U.S. and its two largest trading partners.

"USMCA-compliant automobile parts will remain tariff-free until the Secretary of Commerce, in consultation with U.S. Customs and Border Protection (CBP), establishes a process to apply tariffs to their non-U.S. content," White House principal deputy press secretary Harrison Fields said on X.

The U.S. imported $474 billion worth of automotive products in 2024, including passenger cars worth $220 billion. Mexico, Japan, South Korea, Canada and Germany, all close U.S. allies, were the biggest suppliers.

STOCKS FALL

Ahead of Trump's announcement, shares of U.S.-listed automakers fell on concerns that tariffs would send shock waves through a global auto industry that is already reeling from uncertainty caused by Trump's rapid-fire tariff threats and occasional reversals.

The U.S. stock market also closed lower on worries over tariffs, which have dogged investors for much of the last month. The benchmark S&P 500 Index fell 1.1% ahead of the press conference, and is down more than 4% so far in March for its worst monthly performance in nearly a year.

Equity index futures for the S&P 500 were another 0.4% lower on Wednesday evening after the announcement, signaling a weaker start to trading on Thursday.

Since taking office on January 20, Trump has announced and delayed tariffs on Canada and Mexico for what he alleges is their role in allowing the opioid fentanyl into the U.S.; set import taxes on goods from China for the same reason; launched hefty duties on imports of steel and aluminum; and has repeatedly touted his plans to announce global reciprocal tariffs on April 2.

Regarding the coming April 2 announcement, Trump indicated the measures may not be the like-for-like levies he has been pledging to impose.

"We're going to make it very lenient," Trump said. "I think people will be very surprised. It'll be, in many cases, less than the tariff they've been charging for decades."

The new vehicle levies were expected to drive costs of cars higher for consumers by thousands of dollars, hitting new vehicle sales and resulting in job losses, since the U.S. automotive industry relies heavily on imported parts, according to the Center for Automotive Research.

"At a time when cost is the number one concern for American car buyers, U.S. automakers are working to provide a range of affordable vehicles for consumers," Jennifer Safavian, president and CEO of Autos Drive America, a trade group representing foreign automakers, said in a statement. "The tariffs imposed today will make it more expensive to produce and sell cars in the United States, ultimately leading to higher prices, fewer options for consumers, and fewer manufacturing jobs in the U.S."  

(Reporting by Nandita Bose, Doina Chiacu, David Lawder, Andrea Shalal and David Shepardson in Washington; Additional reporting by Kalea Hall in Detroit and David Ljunggren in Ottawa; Writing by Dan Burns; Editing by Alistair Bell and Matthew Lewis)