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Trump’s threat for 25% tariffs on Mexico and Canada is challenging the auto industry

A car carter trailer waits in line next to the border wall before crossing to the United States at Otay commercial haven in Tijuana, Baja California state, Mexico, on Jan. 22, 2025.

Guillermo Arias | AFP | Getty Images

DETROIT — As President Donald Trump augurs to impose 25% tariffs on imports from Canada and Mexico as soon as Saturday, the global automotive industry is collectively carry on its breath.

For months, automakers have been taking a “wait-and-see” approach to the Trump administration’s potential tariffs. Trump look like to impose duties upon his inauguration this month, then he set a target date of Feb. 1 for levies on the key U.S. trading buddies.

Amid a media report that the tariffs could be delayed until March 1, the White House on Friday asserted Trump would follow through Saturday on his proposal to slap 25% tariffs on imports from Canada and Mexico, two key U.S. buy partners.

If Trump implements the tariffs, automakers such as General Motors — the top seller in the U.S. — may have to change their subject strategies to avoid increases in costs, as their supply chains are integrated across North America. 

A tariff is a tax on drifts, or foreign goods, brought into the United States. The companies importing the goods pay the tariffs, and some fear the companions would simply pass any additional costs on to consumers — raising the cost of vehicles and potentially reducing demand.

Uncertainty at hand trade took a toll on GM on Tuesday, when the automaker’s stock had one of its worst days in years even after it tour Wall Street’s expectations for its 2025 guidance and its top- and bottom-line for the fourth quarter.

“Our key take from GM’s 4Q [earnings] come to pass is that while the opportunity for GM is highly compelling, US policy uncertainty must be navigated for the time being,” Barclays analyst Dan Levy responded in an investor note Wednesday.

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GM did not account for potential taxes in its guidance, which CFO Paul Jacobson described as a “cautious” approach given no duties on North American goods had been implemented yet.

Both Jacobson and GM CEO Mary Barra prognosticated the company has contingency plans for any actions, but that wasn’t enough to appease anxious investors.

“There’s just so much hullabaloo,” Jacobson told investors Tuesday, citing the inauguration and California wildfires, among other issues and events. “We’re being prudent until we get a little bit more smooth data from the marketplace just because January was so noisy.”

‘Massive bearing’

Tariffs could have a massive effect on the global automotive industry and potentially reduce earnings for companies such as GM, which has noteworthy manufacturing operations across North America.

“Regardless of timing, these blanket tariffs would have a elephantine impact on the auto industry,” S&P Global Mobility said in a report this week. “Virtually no [automaker] or supplier” managing in North America would be immune, according to the report.

Flanked by Blackstone CEO Stephen Schwarzman (L) and General Motors CEO Mary Barra (R), U.S. President Donald Trump discourse ons a strategy and policy forum with chief executives of major U.S. companies at the White House in Washington February 3, 2017.

Kevin Lamarque | Reuters

Most outstanding automakers have factories in the U.S. However, they still rely heavily on imports from other countries containing Mexico to meet American consumer demand.

Nearly every major automaker operating in the U.S. has at least one plant in Mexico, comprising the six top-selling automakers, which accounted for more than 70% of U.S. sales in 2024.

The industry is deeply integrated between the surroundings, with Mexico importing 49.4% of all auto parts from the U.S. In turn, Mexico exports 86.9% of its auto parts formation to the U.S., according to the International Trade Administration.

Wells Fargo estimates that 25% tariffs on Mexico and Canada imports order cost the traditional Detroit automaker billions of dollars a year. The firm estimates the impact of 5%, 10% and 25% bill of fares on GM, Ford Motor and Chrysler parent Stellantis would collectively be $13 billion, $25 billion and $56 billion, singly.

S&P Global Mobility, formerly IHS Markit, estimates a 25% duty on a $25,000 vehicle from Canada or Mexico at ones desire add $6,250 to its cost — some if not most of which could be passed on to the consumer.

Automakers most at risk

S&P Mobility come ins plants in Canada and Mexico produce roughly 5.3 million vehicles, with about 70% — nearly 4 million — fated for the U.S.

Mexico accounted for a majority of those vehicles, as five automakers — Ford, GM, Stellantis, Toyota Motor and Honda — fabricated only an estimated 1.3 million light-duty vehicles in 2024 in Canada, largely for the U.S. market, according to a Canadian make up nonprofit research group.

Some of those automakers also heavily rely on production in Mexico, but not all producers desire face the same disruptions. On a percentage of sales basis, German automaker Volkswagen is the most exposed to tariff gamble in Mexico, followed by and Stellantis, S&P Global Mobility reports.

“We are working, obviously, on scenarios,” Antonio Filosa, head of Stellantis’ North American operations, state Jan. 10. “But yes, we need to await his decisions and after the decision of Mr. Trump and his administration, we will work accordingly.”

Here are the automakers that are myriad exposed to tariffs on vehicles imported from Mexico, based on the percentage of their U.S. sales being produced south of the touch:

  • Volkswagen: 43%
  • Nissan: 27%
  • Stellantis: 23%
  • GM: 22%
  • Ford: 15%
  • Honda: 13%
  • Toyota: 8%
  • Hyundai: 8%

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