President Donald Trump has announced new import taxes of 25% on cars and car parts coming into the US, reports BBC.
Trump said the latest tariffs would come into effect on 2 April, with charges on businesses importing vehicles starting the next day. Taxes on parts are set to start in May or later.
The president said the measure would lead to "tremendous growth" for the industry, promising it would spur jobs and investment in the US.
But analysts have said the move is likely to lead to the temporary shutdown of significant car production in the US, increase prices, and strain relations with allies.
Trump's latest move threatens to upend global car trade and supply chains.
The US imported about eight million cars last year - accounting for about $240bn (£186bn) in trade and roughly half of overall sales.
Mexico is the top supplier of cars to the US, followed by South Korea, Japan, Canada and Germany.
Many US car companies have operations in Mexico and Canada as well, set up under the terms of the longstanding free trade agreement between them.
The new tariffs on car parts from Canada and Mexico are exempt while US customs and border patrol set up a system to assess the duties, the White House said. The neighbouring countries see goods worth billions cross borders each day.
Ahead of the announcement on Wednesday, shares in General Motors slid roughly 3%, while Stellantis - the owner of Jeep and Chrysler - fell 3.6%.
In a post on X, Elon Musk said Tesla would be affected by the measures. "The tariff impact on Tesla is still significant," he said.
The companies that bring the foreign goods into the country pay the tax to the government. Firms may choose to pass on some or all of the cost of tariffs to customers.
Trump's plan for car tariffs is his latest in his wider drive to protect American businesses and boost manufacturing within the US.
But while the measures can protect domestic businesses, they also raise costs for businesses reliant on parts from abroad.
Analysts have estimated that tariffs on parts just from Canada and Mexico could lead to costs rising by $4,000-$10,000 depending on the vehicle, according to the Anderson Economic Group.
Trump told reporters the tariffs would be "permanent" and reiterated his reasoning that: "If you build your car in the United States there is no tariff."
The prime minister of Japan, the world's second largest exporter of cars, said it would put "all options on the table" in response to the tariffs.
Shares in Japanese carmakers - including Toyota, Nissan, Honda - all fell on Thursday.
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