President Donald Trump on Wednesday claimed that his proposed tariffs would actually boost the Detroit automakers, despite most evidence pointing to the contrary.
Trump is set to issue 25% duties on imports from Mexico and most imports from Canada next week, a month after the U.S.’ top trade partners negotiated a reprieve. That spells trouble for the automotive industry, which has built out a North American supply chain that’s heavily reliant on both nations.
“Let’s be real honest: Long term, a 25% tariff across the Mexico and Canada borders would blow a hole in the U.S. industry that we’ve never seen,” Ford $F Motor Co. (F) CEO Jim Farley said at a recent investor conference.
According to S&P Global $SPGI Mobility (SPGI) research, almost all original equipment manufacturers will be impacted by the tariffs. Some 3.6 million light vehicles were imported from the two countries in 2024, accounting for 22% of all vehicles sold in the U.S.
About 23% of Stellantis $STLA (STLA)’ U.S. sales were sourced from Mexico, greater than General Motors $GM (GM)’ 22% and Ford’s almost 15%. Outside of the Detroit Three, Germany’s Volkswagen (VWAGY) and Japan’s Nissan (NSANY) would be the most impacted by tariffs.
Both Ford and GM have been operating in Mexico for about a century, making cars like the electric Ford Mustang Mach-E and electric and gas-powered Chevrolet Blazers. Stellantis makes some Jeep models, like the Wagoneer S, at a Mexican factory built in the late 1960s.
A 25% duty on the average $25,000 cost of a vehicle imported from Mexico and Canada would add $6,250 in costs, S&P Global Mobility said. Cars that have parts imported from either country — such as a Ford F-series pickup with a Canadian engine — would also see a price increase.
The Michigan-based Anderson Economic Group estimates that a 25% tariff would add between $4,000 and $10,000 per car to vehicles assembled in North America, according to a recent presentation. A full-size SUV’s price would be increased by $9,000, while a battery-electric vehicle’s price would grow by $12,200.
The president’s announced duties on imports of aluminum and steel would add another $250 to $800 per gas-powered vehicle and up to $2,500 on EVs, the group said, assuming that there are no tariff exclusions. Vehicles made in Europe and Asia would see a $800 to $1,600 price hike. Production and job cuts in the U.S. “would be inevitable,” the presentation said.
“Frankly, it gives free rein to South Korean, Japanese and European companies that are bringing 1.5 million to 2 million vehicles into the U.S. that wouldn’t be subject to those Mexican and Canadian tariffs,” Farley noted at the Wolfe Research Auto, Auto Tech and Semiconductor Conference. “It would be one of the biggest windfalls for those companies ever.”
Stellantis executives on Wednesday said they have been supportive of Trump’s “America First” manufacturing policies, including tariffs. Board of Directors Chair John Elkann, who is leading the search for a new CEO, said Stellantis believes products made in Canada and Mexico that use U.S. parts should be tariff-free.
“We strongly believe that the real opportunity is really to try and close the loophole for 4 million cars that are sold in America that don’t have any US content,” Elkann said.
Part of Trump’s support of tariffs comes from his belief that they can be used to tighten trade deficits with other nations, as well as encourage companies to reshore production. Although GM CEO Mary Barra has said the automaker is poised to mitigate up to 50% of Trump’s tariffs on Canada and Mexico, it’s also entertaining the idea of moving production.
“If they become permanent, then there’s a whole bunch of different things that you have to think about in terms of, where do you allocate plants, and do you move plants, etc.,” GM Chief Financial Officer Paul Jacobson said of U.S. tariffs at a recent Barclays conference. “Those are questions that just don’t have an answer today”