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The measures were intended to strengthen the United States auto industry, but key players have suffered sharp sell-offs

U.S. auto stocks have pulled back sharply in response to fresh import tariffs imposed by Donald Trump on all foreign-made cars.

The tariffs, announced on Thursday, were intended to promote domestic growth, but have seemingly backfired, stoking concerns about the increased cost of importing critical parts from Europe and the Far East.

Among the hardest hit was General Motors, the company behind Chevrolet, Buick, GMC and Cadillac, which shed more than 7% of its value on Thursday. Ford stock also retreated by close to 4%.

Announcing the tariffs in the Oval Office on Thursday, Trump argued that the new measures would create “tremendous growth” in the United States.

He also reacted to the news that South Korean carmaker Hyundai would pump $21 billion into the U.S. auto industry, hailing the move as a “clear demonstration that tariffs very strongly work”.

Tariffs will “shrink, or possibly eliminate” profit margins

But Trump has come under immediate fire for the measures, with a celebrated economist warning of “irreparable damage” to the United States’ auto industry.

Arthur Laffer, to whom Trump awarded the Presidential Medal of Freedom in 2019 for his contributions to economics, argued in a fresh analysis that the tariffs could add $4,711 to the cost of a single vehicle.

“Without this exemption, the proposed tariff risks causing irreparable damage to the industry, contradicting the administration’s goals of strengthening U.S. manufacturing and economic stability,” Laffer wrote in the 21-page report seen by the Associated Press.

“A 25% tariff would not only shrink, or possibly eliminate, profit margins for U.S. manufacturers but also weaken their ability to compete with international rivals.”

European markets suffer

The biggest impact, however, has been seen in Europe, with auto investors expressing concerns over the potential impact on U.S. sales.

The Financial Times Stock Exchange closed 0.27% lower on Thursday as Aston Martin stock pulled back by close to 7%, while the German Dax ended the day 0.77% lower as Volkswagen also lost value.

Porche, Audi, BMW, and Mercedes were among the other European automakers that shed value on Thursday.

The fresh tariffs have also piled pressure on the UK, having been unveiled just hours after Chancellor Rachel Reeves’ Spring Statement on Thursday.

In the Statement, Reeves revealed that she had allocated just £9.9 billion of headroom against the risks facing the economy, placing it among the lowest any Chancellor has announced in recent history.

Trump’s auto tariffs threaten to wipe out this already modest sum.

Asked if Britain could avoid tariffs on key UK carmakers such as Rolls Royce and Aston Martin, Reeves said she was hopeful such a deal could be struck with Donald Trump.

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