The tariff threat is "perplexing" because it would make cars more expensive in the United States if imposed, said David Adams, president of Global Automakers of Canada, which represents Japanese auto manufacturers Honda Motor Company, Ltd. and Toyota Motor Corp.
"There is evidence suggesting that, for decades, imports from overseas have eroded our domestic auto industry", the commerce secretary, Wilbur Ross, said in a statement, promising a "thorough, fair and transparent investigation".
In Germany, one of the largest European exporters into US auto market, the head of the Association of German Chambers of Commerce and Industry estimated the proposed tariffs could amount to more than $7 billion annually for German automakers.
Foreign Affairs Minister Chrystia Freeland said Wednesday that NAFTA negotiations continue "at a very intense level", with officials from all three countries in close contact.
Although a large portion of the US's most popular vehicle models, including those from foreign brands (such as the upcoming BMW X7), are already manufactured within its borders, many are imported from other countries. Almost half of the vehicles sold in the USA are imported, with numerous vehicles coming from assembly plants in Mexico and Canada. But it's also likely that investors are simply learning not to take Trump's threats on trade seriously, after he has backed down from bluffs to withdraw from NAFTA, and declined to impose threatened tariffs on a range of Chinese imports in retaliation for alleged intellectual property theft.
Bernard Mattes, head of the German Association of the Automotive Industry, said in a statement Thursday that it is "watching the current development closely and with concern".
During a meeting with auto executives earlier this month, Trump said he would push for an increase in the production of vehicles built at US plants.
John Bozzella, the CEO of Washington-based auto industry body Global Automakers, said the planned tariffs would be bad for USA consumers.
The news comes the same day that President Donald Trump teased "big news coming soon" for American auto workers. A little-used US law authorizes the president to restrict imports and impose unlimited tariffs on national security grounds.
It's important to point out automobiles have been one of the most contentious topics in NAFTA negotiations, as the Trump administration reportedly wants to limit duty-free status to the vehicles that have their most of their parts created in the USA and North Americas.
Critics fear that other countries will retaliate or use national security as a pretext to impose trade sanctions of their own.
"There is a very high likelihood that if they are not actually fleeing the kinds of things that make you a refugee - which is war, persecution, terror, violence. then they are going to be sent back home", Trudeau said.
"From Canada's side, higher tariffs mean higher prices and also less demand", she said. Formal re-negotiations between Canada, Mexico and the United States have been ongoing since last summer.
The report caused U.S. carmaker shares to jump and hit those of overseas companies like Toyota Motor with its New York-traded shares falling 0.67 per cent.
In Beijing, Commerce Ministry spokesman Gao Feng told reporters that abusing national security provisions would "undermine the multilateral trade system and disrupt the order of worldwide trade".
Both the administration source and the industry sources said that the US Commerce Department could make a formal announcement later on Wednesday.
The argument for vehicle tariffs is even weaker.