Concerns regarding restricted global trade and potential implications on auto industry profits led to a sharp drop in the shares of car manufacturers and a general decline in markets on Thursday following President Donald Trump's announcement of tariffs on the U.S. auto sector. Transport stocks in Tokyo saw a loss of $16.5 billion, with similar declines seen in South Korea. European markets anticipated a sell-off, with the euro weakening and German DAX futures down by 0.7%.

Major car manufacturers like Toyota, Honda, Nissan, Hyundai Motor, and Kia experienced significant drops in their stock prices. Volkswagen, a top European car maker, faced scrutiny as a considerable portion of its U.S. sales are dependent on imports from Mexico. The impact extended to U.S. car brands due to their integrated supply chains spanning North America.

Despite some anticipation of the tariffs, the market reaction indicated unease, especially concerning the potential long-term effects on global trade. The announcement was perceived negatively by the German car industry association and financial analysts, who warned of potential price hikes and reduced growth prospects.

President Trump's decision to impose 25% tariffs on imported cars and light trucks starting on April 3 could significantly affect the U.S. automotive industry, with expectations of decreased sales and profitability. This move is projected to disrupt the established manufacturing operations shared among car manufacturers in Canada, Mexico, and the U.S.

The new tariffs could raise the cost of U.S. vehicle purchases substantially and disrupt production processes due to the interconnected manufacturing setup of North American carmakers. In response, General Motors, Ford, and Tesla saw declines in their stock prices, highlighting concerns about the broader implications of the tariffs on the automotive industry.