The Commerce Department said it would look into whether the vehicle and parts imports were threatening the U.S. auto industry's health and ability to research and develop new, advanced technologies under Section 232 of the 1962 Trade Expansion Act.
"If the tariffs actually went into effect, it would upend the supplier industry", said Ann Wilson, senior vice president for government affairs at Motor & Equipment Manufacturers Association, which represents auto parts makers.
"Import duties on cars would be a nightmare for the German auto industry and would lead to a massive sales impact", said Thomas Altmann at Frankfurt-based asset manager QC Partners.
Mercedes-Benz alone exports large numbers of luxury SUVs from the U.S. Mercedes will export roughly 65,000 cars from the U.S.to China this year, according to forecasts from research group IHS. He has also criticized European Union auto imports and tariffs and earlier this year threatened a "tax" on European imports.
The White House, Commerce Department and Office of the U.S. Trade Representative did not respond to requests for comment.
"But I will tell you, in the end, we win".
Earlier Wednesday, Trump, who has repeatedly pledged to revive American manufacturing, said that "big news" was coming that would be welcomed by US auto workers but he gave no details. If investors were taking the president seriously, one would expect a much larger reaction, given that Toyota, for instance, sells more cars in North America than even its than even its home base of Japan, as its projected to sell roughly 2.4 million cars in the US this year alone. Nonetheless, the Trump administration has set its own precedent in widening the definition of national security to include economic security and could use that as a legal basis to justify its moves.
The impact may be muted for USA automakers, which today export cars from the U.S.to China in limited volumes.
Utah, which has benefitted from trade with Mexico and Canada under terms of NAFTA, could see particularly negative impacts from a US pullout.
And while the investigation will look into imports from countries around the globe, Greg Valliere, chief global strategist at Horizon Investments, surmised that Trump was really trying to send a message to the other two members of the North American Free Trade Agreement, or NAFTA. About 95 per cent of Canadian-made vehicles are exported to the United States. In 2017, 17.2m vehicles were sold in the USA, compared with 15.63m in the EU and European Free Trade Association countries.
Not so welcome: More than 27,000 asylum seekers have walked across the Canada-U.S. border since Trump took office, but Trudeau warned: 'Crossing the border irregularly isn't a short cut into Canada'.
Not a one-way road: The US auto industry exported almost 2 million vehicles worldwide worth $US57 billion. "After many decades of losing your jobs to other countries, you have waited long enough!" he tweeted in the morning.