Trumps 25% Tariff Has Auto Industry In Cross Hairs

Donald Trump has announced plans to impose significant tariffs on goods imported from Canada and Mexico, a plan that could significantly impact automakers.

The president-elect stated that these tariffs would be among his first executive actions after taking office, a move he claims is necessary to combat illegal drug trafficking and strengthen U.S. border security.

The proposed tariffs could have a significant impact on the automotive industry, particularly for manufacturers like General Motors, Ford, BMW, and Volkswagen, which rely on assembly plants in Canada and Mexico to supply the U.S. market. A 25% tariff on vehicles and parts produced across borders could drive up manufacturing costs, leading to higher prices for consumers.

According to Reuters, Mexican plants operated by GM, Ford, Stellantis, and others produced 1.4 million vehicles, with 90% destined for U.S. buyers, in the first half of 2024. GM alone is expected to import over 750,000 vehicles from Mexico and Canada this year, including some of its bestsellers, such as the Chevrolet Silverado, GMC Sierra, and various SUVs.

The automotive industry operates on deeply integrated supply chains across North America, a result of decades of free trade agreements like NAFTA and USMCA. Mexico and Canada supply more than half of the auto parts used in U.S. vehicle assembly, with Mexico alone accounting for nearly 43% of U.S. auto-part imports.

The tariffs also pose risks to U.S. automakers producing lower-margin vehicles. Companies like Nissan, which produces the Sentra in Mexico, might struggle to maintain profitability under the increased costs. Meanwhile, even profitable models like GM’s pickups may face challenges in absorbing these tariffs without passing costs onto consumers.

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